My Recession Proof Investing Plan For 2020

What's up you guys? It's Grinding here. So if you've opened up your computer in the last week, which now that I'm thinking about it, actually you're watching a YouTube video, so obviously you've opened up your computer or your phone to just be here listening to me. So that automatically filters everyone else out who is not open to... I got to rethink this intro.

Anyway, investments have had a crazy wild ride in a matter of weeks. Robinhood has given us some really juicy drama. We've experienced record gains and record losses, and this dude just seems to show up on the cover of every single investing article known to mankind. No, I'm actually being serious. Go and look at this and this one and this one... this, this, this, this. No, I'm not even kidding! Like, I think the entire news media just realizes that this man right here has the perfect thumbnail face, and if it works on YouTube, hey, you know what must work on CNBC as well. Here, I'm gonna show you. I'll do my thumbnail for the video right here. [Music]

Anyway, it's certainly been a very wild investing ride so far in 2020, and with the very real possibility that we're slowly inching closer and closer towards a bear market and potentially even a recession, I felt like it would be a good idea to share my investing strategy for 2020 and how I plan to invest at a time where it might not be good to invest. After all, there's a lot of speculation about the stock market declining further and value about the real estate market collapsing.

And also how 90 percent of my subscribers don't smash the like button for the YouTube algorithm, which is very concerning, and we got to change that. So let's talk about whether or not I get to be waiting this one out just to see what happens. We're also gonna be talking about what's gonna happen to my real estate investments if the market declines and my investing plan for 2020 that I believe should weather the storm and come out ahead profitable.

So with that said, sit back, relax, subscribe if you have not subscribed already, and let's begin the video. Ok, so first, here's the super brief explanation of what's going on in the market summed up in about a minute: beginning now.

Since March of 2009, we have been in the longest running bull market in history. Over the last one hundred and thirty-two months, the S&P 500 has gone up a whopping three hundred and forty percent in value, which if you look back historically makes this not only the longest but also the most profitable.

However, all good things come to an end, kind of. Even though we saw a bit of a drop-off in December of 2018, things quickly came back because people realized we got money to make and so stocks continued surging to new highs and new highs. However, recently there's been a mysterious and easily transmittable illness that's developed overseas that I cannot mention here on YouTube for risk of getting demonetized.

And this illness that'll shalt not be said on YouTube has been wrecking havoc on our entire economy and potentially leading us down towards the path of a bear market and maybe even a recession. This is because in an effort to contain the illness, people are not traveling as much, which means they don't spend as much money, which means they spend more time at home not spending money, which means manufacturing slows down, which means businesses don't do as well, which means businesses lose money and potentially shut down, which means stocks don't tend to do as well.

And then people lose money, and because they're afraid of losing even more money, they pull their money out of the markets and hold it in cash, which causes the market to go down even further, which panics other people who also do the exact same thing and pull their money out of the markets as well, which causes the markets to go down even further.

And then it just becomes this endless cycle of people not wanting to lose money, which ironically causes people to lose money. Basically, until the illness is contained, we don't know the full impact this is gonna be having on our economy, and because of that generally prices are gonna be going down.

Of course, that's a highly simplified explain-like M5 version of what's currently going on, because in the midst of everything, we also have the Fed lowering interest rates down to record levels. We have an oil competition also between two nations who are playing a real-life game of chicken to see who can handle the lowest prices for the longest.

So it's not just the illness that's bringing us down, but also the illness in conjunction with a whole bunch of other crazy stuff that really leads to almost like the perfect storm. So anyway, that's where we are now. The stock market at the time I'm recording this is down about 15 percent from its recent high, and that's 15, by the way, like 1/5, because every time I say 15, I'm worried people are gonna think 50. No, it's 1/5!

And really, with everything else going on, people are looking for a safe investment plan to put their money, and this is exactly what I am doing as well. So this is what I'm doing.

First, let's begin with something that a lot of people have wanted me to talk about and cover, and that would be real estate. For me, this has easily been my biggest investment focus over the last decade. I began by buying three properties in 2011 and 2012. I then bought a single-family home in 2016, a duplex in 2017, another duplex in 2018, and then another property just recently in 2020 that I will cover shortly.

So between everything, I'm now just a little bit over six million dollars deep in real estate, and of course, for purposes of this video, they're all rentals with the exception of one of them that I live in. But yeah, overall real estate has really been my biggest focus. A lot of people have been reaching out and asking me what is going to happen to the future of real estate prices with this mysterious illness that I cannot name here on YouTube and also with the stock market decline.

To answer a question like that, we have to resort to the almighty charts and data because science, and the data I found was actually really interesting. Or basically, it's as interesting as it would be to someone who's highly interested in real estate, which it's interesting to me.

Anyway, this red line represents the national home price index, and the blue line is the Nasdaq stock market index going all the way back to 1987. As you can see, even when the stock market surged and then crashed throughout 2001, real estate was largely unaffected and kept climbing even though we did see a steep drop-off during the 2008 mortgage crisis.

Any short-term drops in the stock market had very little effect on the overall home prices. Instead, real estate values are largely driven by the age-old saying: location, location, location. It's kind of like going and buying individual stocks. Some of them might do insanely well, and then others just flat-out suck.

Well, the same applies to real estate. Real estate prices are heavily influenced by specific market conditions of supply and demand, proximity to employment, and the current supply of inventory on the market. This is going to vary dramatically from location to location, not so much with what's going on with the overall economy.

Secondly, real estate prices are gonna be heavily influenced by how high or how low mortgage interest rates are, and right now they're at historic lows. The Fed just dropped interest rates half a point, and they're expected to lower rates even further, which happens to make real estate way less expensive to own.

And third, generally speaking, people are not going and buying and reselling homes multiple times a day like they are with stocks. The majority of people out there are not gonna have that much turnover of their property, and they buy them with the intention of holding long-term.

So whatever the value is in the interim really doesn't make that big of a difference. Not only that, but try to find a value for a property at any given point in time is rather complex. So for that reason, we don't typically see that big of a price swing like we do with stocks.

So from this perspective, at least as of right now, real estate has done fairly well, and with interest rates at all-time lows, housing has continued to climb even higher. Now, obviously, a lot of the data with real estate lags. As of a few months ago, it's a little bit unclear what the current illness is going to be doing with current values, though I gotta say I'm not really sure how much it will.

Record low interest rates right now are likely to keep prices fairly stable, and for anyone sitting with cash on the sidelines, now tends to be a pretty good time to buy. Now, some people could definitely argue that fewer people are leaving their homes and fewer people are buying real estate, which is probably true, but that also means there's gonna be less inventory on the market as fewer people sell their homes and fewer sellers sell, which ironically low inventory tends to drive prices up.

On the flip side, however, if and when interest rates do go up, that will impact real estate values because it will be more expensive to buy, which means people can't afford as much home, which means prices might end up going down. I would say this is the biggest risk to real estate values, but as of right now, it seems like the Fed has no intention of raising rates, and if anything, they want to lower the interest rates.

So now is a really good time to lock in at a price where it's just... it's so low. So really, as a buy-and-hold investor, this could work out exceptionally well for you. For my own investments, however, I gotta say it's been really difficult finding a deal here in Los Angeles. I've been looking non-stop for the last 7 months, and I was finally able to find a property and closed on it just recently.

So details coming soon, I promise. But actually finding something like that was not easy because not only have prices gone up way higher than what I think they're worth, but there's very limited upside, cash flow is hard to come by, and things are just not good that come on the market.

That's why I think in 2020 I'm finally gonna take a leap of faith and buy a property out of state and invest in a few single-family homes in Phoenix, Arizona. Well, the research I've done, it seems like a really strong growing population. A lot of people are moving there for lower taxes, and your money goes a long way compared to LA.

The properties also cash flow fairly well in a rate of 5 to 8 percent, depending on the area, which I'm sure is pretty low for some of you out there, but like for me in Los Angeles, getting 5 to 8 percent is basically like a magic horn. A magic horn? A magical unicorn! I've called it a magic horn. I'm gonna leave that in there. Whatever. Anyway, it's a magical unicorn of a deal compared to what I am used to, and that's what I meant to say.

So my plan here is to go buy a single-family home in the 350 to about 550 thousand dollar price point, go and hire a property manager to handle everything for me, then just see how it goes. And if everything goes well, then I'll buy another one. And in fact, if it goes well, I'll end up going to buy another one.

I've never bought a property out of state before, so this is certainly gonna be a first. And it's really almost out of necessity at this point because I'm just not finding any good deals here in Los Angeles in terms of cash flow or in terms of what I believe they're actually worth buying at because prices are... they're too high.

Although overall, my real estate plan really hasn't changed much. It's still just buy and hold and rent it out and continue carrying on as usual. To me, this is really just the perfect investment to be holding through a downturn because if interest rates go lower, I can refinance my loans at a lower rate and then cash flow that property is that much more positively.

Second, the real estate values don't really make that much of a difference to me. All I care about is how much rent I receive in the property every single month, and typically if we go back to the super scientific right here, you could see that the rent remains relatively stable regardless of how the real estate market performs.

So in terms of cash flow, I'm fairly optimistic that even if values go down, I really shouldn't see any reduction in rent every month, which is why I feel like a strategy like this works extremely well during a time of market volatility.

Seconds, let's talk stocks. And as surprising as it might be to some people, yes, I do invest in other things besides real estate. I have a 401k, an IRA, and several taxable accounts through Vanguard, Ally, Robinhood, Webull, Acorns, M1 Finance, and any other investing app I forgot to mention here.

But really, overall my main focus has just been buying into the S&P 500 index fund every single year. I've supplemented that recently with some VT-SAX and VIVAT-Bollocks, but overall, as you know, my strategy has really just been to buy and hold.

I've also diversified a little bit into some fun individual stocks here and there, which is basically another term for I have a niche to gamble, but I don't want to go to Vegas because it's too far away. So instead, I'll just do it from my phone.

So I bought some shares of Tesla last year, and then just recently I spent ten thousand dollars buying into American Airlines stock right after I saw their stock price dipped eight percent. But don't get me wrong, this is not a serious investment by any means. I mean, if it goes up in price, great, and if it goes down in price, then you know, so be that.

Anyway, I think if we end up seeing a big correction in prices in the future and prices keep going down even further, I'll probably just ramp up my contributions just a little bit. But otherwise, I'm gonna be staying the course and doing the exact same thing as I always have.

I know there's been a lot of talk about buying gold, investing in bonds, or trying to short the market, but honestly that just seems unnecessarily risky and complicated for a lot of people. And I'm sure most people would just be better off dollar-cost averaging into the market every single week or every single month.

If for anyone it's not aware of what dollar-cost averaging is, all it is is that instead of investing all of your money at one single point in time, instead you just invest a consistent amount long-term every single week or every single month. That way you're gonna be buying into all the dips, you're gonna be buying into all the gains, and long-term everything is just going to average out.

So as far as where I think stocks are gonna be going from here, honestly, who knows? The entire stock market is pretty irrational, but all we can do based on the last over a hundred years of historical data, we just do buy into the markets as soon as you can, hold for as long as you can, and that is going to prove to be the most profitable.

And that leaves me with my recession-proof investing plan:

1. Continue to buy and hold real estate, which won't typically fluctuate in price, and even if it does, data shows that rents remain fairly consistent regardless of what happens, and that's really all I care about at the end of the day. Within 25 to 30 years, all the mortgages are going to be paid off. They will be owned outright free and clear, and then all the rent I receive is pretty much gonna be pure profit.

2. They're gonna be buying into the stock markets as usual. It's gonna be a mix of U.S. equities, international stocks, and bonds, and that's it. This is all meant to be money that I'm not going to be needing for the next 20 to 30 years.

So wherever their value is in the short term, it's not gonna make that much of a difference because I'm not planning to cash out.

3. I always make sure to keep a big emergency fund on the side. I know it sounds kind of crazy, but I keep enough in cash to last me at least a few years in the event the prices come crumbling down, all of my income dries up, and all of my properties go vacant at the exact same time.

But then again, my overhead is extremely low, so it doesn't take that much money saved up to end up lasting me a really long time. Although for anyone else, I recommend you have at least three to six months' worth of your expenses saved up in cash at all times in a high interest savings account or CD or anything else that's easily accessible.

If you don't currently have that, that's something you should immediately work towards before anything else, and I strongly believe in standing behind it. Even if the markets do go down, only invest money you're not going to be needing in the short term. Only buy rental properties that you could afford where the rental income covers all of your expenses plus some, and all those properties only get long-term fixed-rate low-interest rate mortgages so that way there's never gonna be any surprises or anything to throw you off in the future.

This is one of the reasons why I'm such a big fan of real estate, because even in the current market conditions with the stock market dip, I still receive the same amount of rents month after month.

So for anyone who wanted to know my recession and investing plan for 2020, then there you go! There it is. I'm a little bit more cautious than I was before, but I always do my best no matter what to always cut back on my spending, save as much money as I can, invest as much money of that as I can, and of course, to smash the like button for the YouTube algorithm if I or you have not done that already.

So with that said, you guys, thank you so much for watching. I really appreciate it. As always, if you guys enjoy videos like this, make sure to destroy the subscribe button and notification bell. Feel free to add me on Instagram. I post pretty much daily, so if you want to be a part of it there, feel free to add me there as on my second channel, The Graham Stefan Show. I post there every single day I'm not posting here, so if you want to see a brand new video for me every single day, make sure to add yourself to that.

And lastly, speaking of stocks, if you guys want to free stocks, use the link down below in the description. Webull is going to be giving you 2 free stocks when you deposit $100 on the platform, and one of those stocks can be valued at $1,400. So if you want a chance to get two free stocks with one of them valued up to a lot of money, feel free to use that link down below and let me know which two free stocks you get.

Thank you so much for watching, and until next time.