How To Invest In 2020 | My Concerns

What's up guys? It's Graham here. So let's attempt to answer the age-old question—a question that's been unanswered for thousands of years, a question that historians have been pondering since the beginning of time—and that would be: how to invest in 2020.

No seriously, this is a really important topic that I wanted to bring up, and now is the perfect time to do so. After all, we've just seen another record year of stock market all-time highs. Interest rates are at their all-time lows. Nearly anything you could have invested in over the last 10 years has made money, and at this point, it's almost incomprehensible to think that losing money is even a possibility.

But that, unfortunately, brings up several very concerning issues that very few people are talking about. Because the reality is, there will be a time where the tides turn and our investments will go down in value. And I'm afraid when that happens, a lot of people are going to end up getting burned.

So in an effort to make sure that does not happen to anyone who watches this video, these are the best investment strategies that you can begin implementing today and what every single investor needs to know in order to make as much money as humanly possible.

So just to bring you up to speed, we're now in the longest-running bull market in history, which began in March of 2009. Since then, we've seen almost eleven years of consistent year-over-year growth, with a total return of about four hundred seventy-two percent. Historically, that largely outpaces nearly any other economic expansion that we have seen over the last 100 years.

In fact, there's only ever been three other times that have even come close. Besides the recovery from the Great Depression, we have the post-war boom that lasted just over seven years with an overall return of 454 percent. Then we had Reaganomics during the 1980s, which lasted five years and gave a 303 percent return. We also have what's known as the Great Expansion during the late 1990s, which lasted over nine years and produced a 391 percent return.

And then we have the topic of today: our nearly eleven-year-old bull market, which continues inching higher than anything else I've mentioned so far, with really no end in sight. Now, this is not to say that the markets can't continue climbing upwards. After all, right now we're in somewhat of an uncharted territory, and no one can predict what is going to happen.

Not to mention, just because we're at all-time highs does not mean it can't continue going even higher. Just take a look at the last few years. In 2013, the stock market hit an all-time high, and consequently, people called it a bubble. If you're wondering, the all-time high that people were referring to was that the S&P 500 hit the staggering price of—wait for it—1806 dollars a share.

But then again, in 2014, the markets also hit brand new all-time highs, and again because of that, people were calling for the upcoming stock market crash. At that time, the S&P 500 was trading for the record price of 2016 dollars a share. And sure enough, in 2015, stocks yet again hit all-time highs, and as usual, there was more talk about this looming stock market bubble. That was when the S&P 500 was twenty-one hundred and twenty-eight dollars a share.

Then again, you guessed it, in 2016, the stock market was at another all-time high, and the stock market was on the verge of another bubble. That was when the S&P 500 was trading for twenty-one hundred and ninety-three dollars a share. Then again in 2017, stocks were at all-time highs. Economists were calling it a bubble, and the S&P 500 was trading for twenty-six hundred and fifty-seven dollars a share.

Jeez, I'm almost done here, I promise! 2018 brought record highs, more bubbles, and that was when the S&P 500 was trading for twenty-nine hundred and forty dollars a share. Then again last year, stocks again hit all-time highs, like buttons were being smashed at record levels. Oh wait, 2020 is coming! That's when the S&P 500 just barely crossed three thousand dollars a share.

And then today, we're back on top with more all-time highs, all with the S&P 500 just barely trailing from its peak of thirty-three hundred and twenty-nine dollars. So, as you could see throughout this entire bull market, we could really infer a few things.

Number one, I'm gonna ask you to smash the like button for the YouTube algorithm because pulling all of that data and editing it all together took me like 30 minutes to do. So if you wouldn't mind, and you appreciate all that information, it would help me out a lot to help out the YouTube algorithm.

Okay, but seriously, here's what we do know. First, the market will always and consistently be hitting all-time highs. It's nothing new, and it's nothing to be concerned about. After all, let's do the math, and I will prove to you guys just how much of a non-issue this really is. If we go and use our trusty source, Google, we can see that there are two hundred and fifty-three trading days per year.

Since the year 1950, we have had 17,710 trading days, of which 1,110 of those days were trading at all-time highs. This means that if we do some simple division, okay, carry the four, multiply by pi squared, smash the like button for the each of algorithm, okay, so there we go, we did it!

This means that the market is trading at all-time highs six point two six percent of the time, or in other words, one out of every 16 days, on average, the market is trading at a brand new all-time high. That is our factual data over the last 70 years. So, as scary as people want to make it out to be, it's really just a normal part of the markets. As production increases, prices go up, populations continue to grow, and like buttons get smashed.

Secondly, we can reasonably conclude that most of these stock market experts who make these predictions have really absolutely no idea what they're talking about. Predictions like this are overall rather worthless. Sure, it might be entertaining to read, and it's kind of fun to think about you knowing something that the rest of the world doesn't.

But if you go and invest based off that information, it's really the equivalent of scratching off a lottery ticket in terms of whether or not the information is right or wrong.

Third, when it comes to this data, there's something else; it's a little bit more concerning and something that all of us need to remember. And that is that every single one of these bull markets eventually came to an end, and prices dropped. This is the information that not enough people are covering and misinterpreting. It could be disastrous to an investor.

Here's the thing. From what I've seen, a lot of investors—especially newer investors—forget that the markets can go down, and not everything goes up consistently in price. They're investing with the mentality and expectation that the market should progressively and automatically just increase in value year after year.

They've never really experienced anything where the markets have dropped for an extended period of time. That, I believe, is a dangerous combination, where people can get ahead of themselves and maybe over-invest and then have no idea what to do in a bear market when they end up losing money.

And this is the reason why I think it's so important to bring this to light, because I guarantee there will be some point in the future where the markets end up going down, and that will be a true test of strength in terms of whether or not you have what it takes to hold through it. Continue buying without selling.

In terms of just how bad things have gone in the past, here's what we've seen. The Great Depression of the 1930s lasted almost three years, with the loss of over 80 percent in the stock market. Then the late 1970s saw a recession lasting almost two years and a loss of over 42 percent in the market.

The dot-com bubble was very similar, lasting about two years and losing about 44 percent in value. And our most recent one, the Great Recession, lasted just over a year with a loss of over 50 percent.

From the last 100 years of data, our average bear market has lasted a mere 1.4 years, with an average loss being about 40 percent. Now, don't get the wrong idea. I'm not bringing this up because I think there will be a recession coming soon. In fact, far from it!

When we look at this objectively, we could see that a loss of 40% or more has only happened four times in the last 100 years. But even with all of that, I am just not a fan of trying to time the overall market. There have been multiple studies that have shown that buying and holding, regardless of where the market is at the time, is the most effective and profitable investment strategy out there.

Not to mention, you have a better chance of making money by just dumping everything you have into the market all at once than you do by dollar-cost averaging into the markets bit by bit. That is the factual research that I wholeheartedly stand behind.

However, the point of this video is not just to spew factual information at you guys and then ask you to use my link down below in the description because WeBull is going to be giving you two free stocks when you deposit a hundred dollars on the platform, with one of the stocks valued up to $1,400!

So, quick side tangent here: if you guys are interested and want free stocks, that link is down below! But anyway, I digress. The point of this video is to make you very aware that investing your money and making profits consistently year over year is not normal without eventually experiencing a recession.

And my concern is that too many people think investing is easy just because everything that they've invested in has done well and made money. I believe that is going to cause so many people to panic if and whenever the market does have a correction.

And really though, investing can be just as simple and just as easy as buying stocks or index funds and then holding forever. But it becomes that much more difficult when the markets go down, and you actually end up losing money on paper.

Experiencing something like that is not easy for people to go through, and who knows when that might happen? It could happen tomorrow, next month, next year, or in ten years from now. That's why it's so important that you set yourself up in a good position now so that when it does happen, you're not gonna be royally screwed.

Think to yourself: if your investments dropped 20 to 40 percent tomorrow, would you be okay? Again, this is not to say that your investments will be dropping anytime soon—they might, they might not. Your investments might drop way more than 40 percent, maybe way less, depending on what you're invested in.

But if this is something that would so dramatically shake you up to your core, get you so fearful about losing money and cause you to sell off everything as a way to preserve your capital, then you really need to reconsider how much money you're investing and try to diversify your investments as much as you can.

I really believe a large component of investing for most people out there is emotional. Even though we could look at the fundamentals and see that the best, most profitable investment strategy really just comes down to saving money—invest when you can, invest consistently, don’t try to time the market, and hold long term—I have a feeling that that logic will be completely thrown out the window the second people actually lose money.

As much as I don't want to believe it, as soon as money is lost—even on paper—so many people will no longer believe in the process. They're gonna think this time is different, and that is the moment where people are gonna get burned.

Even in December of 2018, as the Nasdaq lost about 20%, I can't tell you how many people emailed me saying that they've dumped all of their investments at a loss and are waiting to buy back in. I also got people angry at me for even suggesting that they invest in the first place because they put their money in, and it went down in value. But guess what? The markets went back up!

And everyone who sold and then sat on the sidelines just kind of waited— they're perplexed. Everyone else who held and did nothing came out ahead, rather profitable.

So, by acknowledging and even anticipating that the markets will drop in the future, and that it's to be expected and normal, is gonna make it so much less scary when it does happen.

The second thing you could do is have a long-term outlook on your investments. To be honest, nobody knows what's gonna happen over the next few years, but if we look back historically, since the inception of the stock market, a 20-year holding period has never once produced a negative result.

That just means that as long as you don't plan to sell your investments, any short-term drop or correction in price really shouldn't be any concern to you at all because you'll have plenty of time to recover. Not only that, but any drop in the stock market pricing should almost be celebrated in a weird way—after all, you could buy the exact same stocks at a discount before they go back up.

And even if it continues going down as you're buying more and more, then not to worry—just see it as you getting better and better deals.

Now, on the other hand though, devil's advocate here, but if you're over the age of 50 or know you're gonna be needing this money in the short term, then I'll be honest with you: you should not be investing in anything that has the potential to drop so much in value.

For example, if you know you're gonna need this money to pay for some upcoming bills, then chances are you can't afford any drop in price. Because of that, you're gonna be way better off just keeping your money sitting somewhere safe, like in a high-interest savings account.

Now sure, you might miss out on some market gains if the market ends up going up, but at the very least, you're gonna guarantee having access to all of your money whenever you need it.

But overall, as long as you have a long-term outlook when it comes to investing, any short-term drop in prices should be completely ignored. Just carry on as usual.

Third, it's also so important, no matter what, to keep an emergency fund worth three to six months of your expenses in a high-interest savings account. This is your safety net in the event the stock market crashes, you lose your job, and our entire civilization collapses into an endless abyss and aliens overtake human existence.

So at least, if something like that happens, you have three to six months worth of your expenses to hold you over until you find a new job or maybe readjust your lifestyle to the new post-apocalyptic world.

For me, my emergency fund is really just my peace of mind, and I know this might be excessive for most people, but at least for me, having one year of expenses saved up at all times in cash gives me so much less anxiety about ever having to worry about what happens with the market.

And in return, that allows me to invest so much more logically, without concern about my emotion or fear ever getting in the way. So I highly recommend that you have a similar emergency fund as well, because in the event of a recession or a drop in prices, that emergency fund might be your saving grace.

It's gonna be the cash that you could draw from for an extended period of time without needing to sell your investments at a loss at a time where maybe it's not a good idea to sell. That way, the longer you hold your investments, the more likely they are to recover and make you money.

Fourth, I also recommend that you pay down any high-interest or variable interest rate debt now, while the going is good. That means that any credit card debt, personal loans, or any short-term mortgages should be paid off as soon as you can.

I’m just a firm believer that we should all make hay while the sun is shining—I think that's the term—when the going is good. Now is the time to put yourself in the best financial position possible. By paying off high-interest rate debt, you're gonna be reducing your overhead monthly expenses.

That just means more money that you're gonna save and more money that you're gonna have left over to buy into the markets in the event they go down. The last thing I would ever want to see is someone who's ramping up all of their spending just because the markets are surging along right now, and then as soon as the market slows down or stops, they're caught with a house full of cards that's only a few payments away from bankruptcy.

So use this time to reduce your debt and overhead, and even if we don't see a recession for another 20 years, then at least you'll still be happy that you got this out of the way early on.

And fifth, since this video is about how to invest in 2020, here is my advice and exactly what to do regardless of what's going on with the market.

Number one: look into maxing out all of your retirement accounts. I recommend that most people begin by maxing out what's called the Roth IRA. This is a retirement account that lets you contribute post-tax money up to six thousand dollars a year. Then, any profit generated within that account is going to be completely tax-free after the age of fifty-nine and a half.

This means that if you end up making tens of thousands or hundreds of thousands of dollars in profit over the next few decades, you're not going to be owing a single penny in taxes as long as you take that money out of the account after the age of fifty-nine and a half.

I also recommend that people look into contributing to a 401k as well. Now, this is an account that you can invest pre-tax money into, and then you're taxed on the money only when you take it out of the account after the age of fifty-nine and a half.

So doing this allows you to save more money upfront in taxes, which then again gives you more money to go and invest right now.

Second, in terms of exactly what to invest in, the choice is really yours. But typically, my recommendation is always going to be an index fund. This is really just a broad investment that tracks the overall market, so if the entire market does well, so do you.

The biggest advantage of doing this is that it's super easy to do—it takes almost no work. They're completely diversified, and index funds typically outperform even the best investors and hedge fund managers in the world.

When it comes to me, I follow the three-fund portfolio, which covers a mix between US stocks, international stocks, and bonds. If you just want to copy kind of what I do, it's 70% VTI, 20% VXUS, and then 10% BND.

That should give you a very broad range of investments that should hopefully do fairly decently over the next 20 to 30 years. Then if you want to invest in individual stocks like Tesla, then be my guest! But understand that doing this is much riskier, and your likelihood for losing money is much higher, as is your likelihood for making money is much higher.

So, as long as you know what you're doing and you're okay with the risk, then be my guest. Not to mention, as you gain more experience, you could also look into alternative investments like, let's say, real estate, which is something that I have focused on.

If you're interested in doing that, all I recommend—because I have so many videos on this already—is just YouTube the search term "Graham Stephan real estate investing," and then all my videos are gonna come up. Not to mention, I actually have a real estate investing playlist here on the channel, so feel free to check that out.

And then, the third step to doing this is just—do it all consistently. Investing is never meant to be just a one-and-done approach. You're really meant to invest a consistent amount of money every single week, month, and year, year after year without skipping a beat.

Doing that allows you to buy in at the lowest of lows and highest of highs, and be able to average out your investment over a long period of time. And most importantly, just remember that markets like this will not go up forever. There will be a recession, and there will be a correction at some point in the future.

It's best to put yourself in the best financial position possible so that whenever it happens, you're not going to be in a bad spot financially, and you're already gonna have a safety net in place to be able to ride it through successfully and make a lot of money when the market does eventually recover.

The investors who have the ability to buy into the markets as they're dropping, without fear and without selling, end up making the most money long-term. The only investors that get screwed are the ones that panic sell everything and then get frustrated that they lost money.

So don't ever get overly confident that everything you're doing is genius, or that investing is really easy because your only experiences are during a wild bull market. At the same time, don't just sit on the sidelines doing absolutely nothing, waiting for a drop, because in a way, that's almost just as worse.

As long as you don't need the money anytime soon, sitting on cash is really just wasted potential—not to mention, it's whittling away every year due to inflation.

So invest consistently, long-term, have an emergency fund, pay down high-interest rate debt, and reduce your expenses so that whenever it does happen, you'll be there waiting to take advantage of it.

And smash that like button for the YouTube algorithm!

So with that said, you guys, thank you so much for watching. I really appreciate it! As always, make sure to subscribe, hit the notification bell, and add me on Instagram. I post there pretty much daily, so if you want to be a part of it there, feel free to add me there as well.

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.

And lastly, like I said, if you guys want free stocks, use the link down below in the description. WeBull is going to be giving you two free stocks when you deposit $100 on the platform. One of those stocks can be valued at $1,400!

So if you want a chance to get a stock that's potentially worth a lot of money, make sure to use that link down below in the description. Thank you guys so much for watching, and until next time!