How I'm Investing In 2022

What's up guys, it's Graham here. So for a lot of us, 2022 is probably going to be one of the most confusing years of investing. After all, with interest rates beginning to increase, there's the concern that stocks might begin to decline. Real estate investing is an option, but home price growth has begun to decelerate now that the FED is tapering their mortgage bond buying. And with the stock market, yeah, it's easy to buy in, but how could you be sure it's the right time, especially when the market's already up 45% in the last two years?

Well, given all of that uncertainty, I thought that it would be helpful to share exactly how I plan to invest throughout 2022, where the next big opportunities could be, and where the markets can move over these next 12 months. Intoshiba! Elon! Just kidding! Although, real talk, before we start, I want to sincerely thank everybody who subscribes, hits the like button, or comments down below for the YouTube algorithm. It helps out the entire channel tremendously, and without your support, none of this would be possible. So thank you guys so much for doing that! And also, a big thank you to Truebill for sponsoring this video, but more on that later.

Alright, so what makes this year so interesting is that we're dealing with some rather unprecedented headwinds that haven't exactly existed before. Now, of course, sure, in the past, we've seen excess inflation and stagnation throughout the 1970s. We've seen a sudden interest rate spike in the 1980s that caused a brief stock market sell-off, and we've seen what happens during a prolonged shutdown in 2020. But now it has come time that we have to deal with the repercussions of consistently putting off the inevitable, and that would be removing stimulus, raising rates, and preventing consumer prices from rising even higher. That added this really confusing layer on top of everything else because even though the last two years have heavily favored the investor, things just don't move up consistently without a few bumps along the way.

So given how we're near record highs while the market begins to panic on the whims of interest rates, here's my own plan throughout the next 12 months that I believe should be able to withstand whatever happens. So without further ado, we should start here. First, let's start off with the stock market. Throughout the last two years, without exaggeration, I invested pretty much everything that I had into about three dozen individual stocks, an S&P 500 index fund, and a total stock market index fund by Charles Schwab. All in all, since I dollar-cost averaged into the markets on a regular basis, I made a year-over-year return last year of about 22%, which for me capitalizes on the momentum of the market without perfectly trying to time the peaks and lows.

However, buying into index funds was also very much strategic because I made a very conscious plan to diversify my portfolio as much as possible. And really, up until now, I had too much of my money invested in real estate. I know that sounds kind of crazy to say, but seriously, two years ago, I had almost a hundred percent of my net worth tied up between seven properties in Los Angeles, and it got to a point where I realized that wasn't smart. I began to realize that beyond a certain point, it becomes more important to diversify into other areas, so that way if something happens to one, you have something else to fall back on.

So I set out on a goal to have as much invested in the stock market as I do in real estate, and I'm really proud to say that as of a few months ago, I hit that milestone. That means for the rest of 2022, I'm still going to be investing in index funds, although it'll be slightly less than I have in the past at roughly 30% of my income. But as far as my thoughts about where the market might be headed over the next year and when the crash is finally going to come down, my honest answer is I have no clue, and nobody knows. It's still unclear how much the FED is going to be tapering their stimulus, when interest rates will increase, how the markets will react, and if supply chains will begin easing up. There are so many variables that could change on a daily basis, and giving any sort of accurate answer is really just a guess at best.

It'll keep going up until you've invested all of your money, and then it'll keep going higher, or it'll keep dropping until you've run out of anything to invest, and then it'll drop even further. So given that, as long as you have an investment time frame of at least 10 years, the best thing that you could do is ignore the noise and keep buying as usual. The truth is sometimes the simplest approach is also the most effective, and in this case, a 20-year holding period has never once produced a negative result.

Although let's rewind for a second because you might have already noticed that I'm only investing 30% of my money in index funds this year. So where's the rest of it going, you might ask? And that would be real estate. See, like I mentioned prior to 2020, real estate was pretty much my only investment. I would work full-time as a real estate agent, save my commissions, and then after months or even years of searching, I'd buy a worn-down property, fix it up, and eventually rent it out. This is how I was able to accumulate seven properties throughout Los Angeles over 10 years, and even though it was a lot of work, I really enjoyed it.

However, after a certain point, I realized it wasn't smart to be a hundred percent invested in one asset class in one location. So for that reason, I made the conscious effort to divert my attention into other areas until I was properly diversified. And now that I've hit that milestone, I'm planning to go back into real estate to where I could allocate about 50% of my money. Now on the surface, it seems almost unanimous among experts that housing prices will continue to rise throughout 2022, although it is at a slightly slower rate. CoreLogic, for example, expects housing prices to see a 6% increase throughout the next 12 months. Realtor.com predicts another 2.9% rise, and Zillow says that supply chain bottlenecks and years of under-building will keep inventory relatively low for the foreseeable future.

But now that interest rates are expected to increase, I believe we could start to see a little bit more selling pressure. Prices could begin to stabilize, and for the first time in years, it might be possible to buy the right deal at the right price. I've really missed those projects, and I believe real estate could be a fantastic way to leverage your money, build your wealth, and make a positive difference by turning something from this into this.

Now in terms of everyone watching, as far as what I think is going to happen, personally, I wouldn't be surprised if the market begins to soften once the Federal Reserve raises rates. But I don't think that would crash the market. There are really so many other factors at play that will influence a property's value, from the local market conditions, supply and demand, to replacement costs. So even if one or two of those deteriorates, the others should more than help stabilize the value. Not to mention, since I buy these properties with the intention of renting them out, the value in between now and the next 15 years doesn't make a huge difference. So anytime you buy something with the plan to hold it long term, you become insulated from the short-term movements in price.

As far as my own advice for everybody watching: number one, always wait to find the right deal. I would never advocate rushing in to buy something because interest rates are still low or because you want to get something as soon as possible. It's so much more important not to get carried away and only pull the trigger when the numbers work. There's enough upside, and it's in the right area.

The second, you should only buy something if you plan to hold it for at least five to eight years. The reality is anything can happen in the short term, and as 2020 has shown us, nothing is impossible. Holding onto your property for at least five to eight years is going to ensure that you'll be able to ride through any fluctuations in price, even if the market ends up going down.

And third, as an investment, the value of the property should always come second to cash flow. Of course, it's always fun to look at your home's value online and see that number grow each and every year, but that number is somewhat meaningless unless you plan to sell or refinance. So instead, you should focus right now on the bottom line, and that would be cash flow.

And finally, we have the other category, which makes up the remaining 20%, and that would be a combination of cash, cryptocurrency, and other random collectibles that somehow managed to outperform the S&P 500. But listen, before we go into that, for a while now, people have been asking me about how I budget my money, how I track my expenses, and which programs I use on a daily basis. And one of those programs, Truebill, just so happens to be sponsoring today's video, and I'm really excited to be talking about them.

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Alright, so in terms of my other investments, let's start off with cryptocurrency at 8%. If some of you know, in the beginning of 2021, I made the choice to allocate 1% of my entire portfolio into a 60/40 split between Bitcoin and Ethereum. And I have to say, the more I researched and learned about cryptocurrency, the more comfortable I felt increasing that amount over time. Like throughout the last year, I've been buying both Bitcoin and Ethereum on a consistent basis, regardless of where it trades.

And as a result, my allocation has increased. For instance, what started off as 1% quickly became 2%, which became 3%, which became 5%, and then 6%. And now my goal is to have 8% cryptocurrency by the end of the year, split evenly between Bitcoin and Ethereum. Not to mention, what I found very interesting is that studies show that you don't have to hold a large amount of Bitcoin in your portfolio to see a positive difference. In fact, Fidelity found that just a 5% allocation to Bitcoin would have boosted the cumulative return of a traditional portfolio by 65% since 2014, even despite the sell-offs along the way.

On top of that, a New York investment firm even posted their findings that their best performing portfolio contained 3% Bitcoin, and that boosted their account's value by 50%. So when it comes to this, it's very evident that a little bit goes a long way. That's why I've taken the stance that you can invest in cryptocurrency as a part of a responsible, well-diversified portfolio, but only invest a small amount relative to the rest of your account. Stick with the largest cryptocurrencies out there that have a proven track record. Only buy with the intention of holding long term, and that should give you the best chance of making money.

Next, we have cash. To me, this is really a safety net in case something were to happen. You need cash immediately, and you can't call JG Wentworth! 877 cash now! Those commercials are way too catchy! Anyway, I've always kept enough cash on hand to be able to cover one to two years of living expenses, provide a big enough buffer in the event an opportunity were to come up, and of course, to pay for taxes because that's not automatically deducted.

Now for me, I try not to keep too much cash on hand because otherwise that would be a wasted opportunity, but there is also something to be said about the peace of mind it gives me just to be able to have a little bit of extra cash on hand. So even though I don't optimize this one perfectly, it does have a psychological impact to be able to have something to fall back on just in case. That also leaves me with the opportunity to invest in startups, which is something I've really enjoyed doing over the last two years.

To date, I've invested in eight companies, including two that I've done with partners, including bankrollcoffee.com and the Hungry Bull app that I'll link down below in the description. If it's meant to be, a daily newsletter where you could track all of your favorite stocks and see all earnings reports in one place, and over time we plan to build it out even further. So if you want to be a part of it, the link is down below in the description. I've also invested in the free stock trading app Public, where of course, if you want a free stock worth all the way up to a thousand dollars, you could use that link down below in the description and use the good gram.

And when it comes to this, it's also really important that I only invest in companies that I like and use myself. That way, I could have a better grasp in terms of how they might do in relation to everything else. But with this, since startup investing is risky, I've basically taken the mental approach that once I invest my money, it's gone forever. I mean, if something happens, great! But otherwise, I've already mentally burned the money to the ground.

My understanding is that most angel investors throw money at 20 to 25 different companies with the expectation that maybe one or two will actually pan out. So even though I'm fairly optimistic about everything I've done so far, I'm not naive to think that they're all going to turn into multi-billion dollar buyouts, so we'll see what happens. And finally, there's the other category. I thought this was kind of funny, but a year ago I said this, and part of me would really love to invest in something like a Ford GT for instance, which lately has been climbing up in value.

But we'll see on that. No promises! And yep, I ended up getting the car, and now it's worth about 25% more than what I paid for it! Now obviously, I'm not sure I could justify buying another car since I don't drive anywhere, but I'm not opposed to it if the right deal were to come up. And I could certainly see collectible cars becoming a lot more valuable over the next decade, like manual transmission Lamborghinis, a well-opened SLS AMG, or even a Toyota 7000 GT one day.

Do I think this other category could also include fine art and watches? But I'll be honest, the market for this is absolutely ridiculous over the last year, so I'm not sure if that's ever going to happen. But I'll never say never! So overall, practically, here's where I'm going to be investing throughout 2022. First, I'm planning to dial back my index fund investing to about 30% of my income. I've already hit my target allocation between stocks and real estate, so from here on out, I'm only going to be investing enough into the S&P 500 just to be able to ride up the market over time and continue to build up my position.

Second, I'm going to invest about 50% of my money this year in real estate. Like I mentioned, I think there's a lot of potential here for the right properties, and I would love to get back to documenting the process here on the channel like I used to in the good old days before COVID. And third, I'm keeping the remaining 20% split between cash, cryptocurrency, and alternative investments. Besides cash, most of this is going to be high risk, high reward.

So that is my investment plan for 2022, and my biggest takeaway here is to always keep an emergency fund, invest consistently, and diversify your investments so that you're not just dependent on one asset at one time. By doing that, you'll be much better positioned in the event the market goes down, or even if it goes up! Either way, you win! And most importantly, do not panic sell, even if the markets continue to go down like they somewhat have been. Study after study shows that the people who do the best have the patience just to keep buying and hodling, and subscribing if you haven't done that already.

So with that said, you guys, thank you so much for watching! Feel free to add me on Instagram and to my second channel, The Graham Stephan Show. I post there every single day I'm not posting here, so if you want to see a brand new video from me every single day, make sure to add yourself to that! Thank you so much for watching, and until next time!