How To Get Rich In The 2024 Market Reversal

What's up, Graham? It's guys here, and 2024 is going to be out of control for investors. Like, just consider that in the last 12 months, the S&P 500 has already increased by a whopping 26% and broken through all-time highs. The housing market surged nine straight months to a brand new record. Bitcoin more than doubled on hopes of an ETF, and Tesla machines are slowly coming to life and rebelling against human existence.

Okay, but in all seriousness, even though this last year has been incredibly rewarding for anybody who's continued investing, there's a lot that could happen in 2024 that we need to talk about. With several upcoming events that are about to have a huge impact on pretty much everything, I’m here to share my exact investing plan.

I’ll explain what history says is most likely going to happen throughout the next year for stocks, real estate, and cryptocurrency, the warning signs to look out for, and then finally what you could do about all this to put yourself in the best position possible. As soon as you hit the like button and subscribe, since I post every single week and do my best to respond to as many of your comments as possible. Don't believe me? Leave a comment, and I'll do my best to respond to you.

So, thank you guys so much, and also a big thank you to Hero Bread for sponsoring today's video, but more on that later.

All right, so to start, what makes this year so much different from the last is the fact that we're facing completely opposite conditions than 2023. Like just consider that for the last two years, the Federal Reserve has been raising interest rates to combat inflation, and now we’re seeing those interest rates decline for the first time since early 2022.

In addition to that, 2024 marks an election year, which tends to be pretty volatile. Another government shutdown is looming in just a few weeks, except this time it’s going to be more difficult to kick the can down the road even further. Most importantly, nearly every single asset class is close to its all-time high, worrying investors who wonder how much higher can this possibly go.

Honestly, all of this has added a really confusing layer on top of everything else, because even though this last year has heavily favored the investor, prices don't just go up forever consistently without some bumps along the way. Not to mention, if you look at the market throughout the last two years, it's essentially been completely flat.

So in terms of where to begin, let's start here: number one, the stock market. First of all, studies show that the average American is absolutely horrible at investing. In fact, statistically, the typical return that most people achieve is just barely higher than the rate of inflation. So if you don't take the time to at least understand this, you're going to have no idea what to watch out for.

It all begins here. In 2014, Business Insider released an article explaining why the average investor does so poorly or even loses money despite prices going higher. Just for context, by the way, this article was written when the S&P 500 had fallen to 1820. However, despite this, in hindsight, being one of the best opportunities to buy into the stock market, the average investor instead sold and waited for the market to recover.

Except in doing so, they missed out on some of the best moments of the entire decade. I mean, I’m sure we’ve all probably seen the same chart showing what happens when you’re out of the market during the best days over the last 20 years. But what I personally found the most surprising is that during that time frame, only 40 days were responsible for whether or not you make or lose money. That’s it.

As they say, missing these days does so much damage because those missed gains aren't able to compound during the rest of the investment holding period. Likewise, there’s also the finding that the best performing days come right after the worst performing days, as you could see here.

On a more practical level, they even analyzed fund inflows to see exactly why investors were underperforming the market by a lot. And as I'm sure you might have guessed, they found that inflows became most aggressive as markets peaked and outflows ramped up when markets were near their lows. In other words, investors consistently bought assets that were overvalued and sold assets that were undervalued.

So, what does this practically mean for 2024? Well, that’s why I’ve always approached the stock market as a long-term investment strategy with money that I don’t intend on touching for at least 20 to 30 years. That way, any of the day-to-day fluctuations really make no difference whatsoever.

Once you zoom out, you'll see that it's pretty profitable to stay invested. For instance, one way to analyze potential returns is to look at what’s called the rolling 20-year period of the S&P 500, which basically takes a snapshot to determine exactly how much money you would have made throughout every single time frame.

Surprisingly, it’s found that throughout the last century, a 20-year holding period has never once lost money. The reality is, the worst ever 20-year return occurred in 1948 at just under 4% a year, while the best started in 2001 with the market earning more than 16% a year. It seems as though most years, you’ll tend to earn anywhere between 7 and 10%.

But in the short term, the honest answer is anything can happen. Just for some context, studies show that in the first year, you have a 73% chance of being profitable, which increases to 80% in the second year, 90% in the fifth year, and 97% in the tenth year, basically implying that the longer you stay invested, the more likely it is that you’ll make money.

However, I know some people are going to comment, but Graham, this year’s an election year, and you have to take that into consideration for your video! And I agree. So here's the data: if we look back historically throughout the last 70 years, we can see that on election years, in the months of October, the market drops an average of about 1%.

However, the good news is that on average, all of those losses are made up in the months of November and December, completely reversing any losses that occurred beforehand. Now, even more surprising is that overall, election years aren’t all that bad either. If we take a look all the way back to 1928, the market has gone up 19 out of 23 times during the entire year of the election.

Now, that doesn’t mean that past performance is going to happen again and again every single year, but it does indicate that if you stay invested, you’re going to come out ahead more often than not. I also find it interesting that, according to Ryan Dietrich's information on Twitter, the S&P 500 has so far always been positive in the year following a 10% drop and a 10% gain, meaning 2024 could be another fantastic year for investors.

That’s also echoed by the fact that, besides the years of 1938 and 1963, when the market goes up by more than 20% in a year, it's always increased more in the subsequent year. This is exactly why I’ve kept the same mindset: that it’s probably best to dollar cost average into the overall markets on a regular basis, regardless of where it’s priced.

If the past is any indication, there’s a good chance that it’s going to be worth a lot more in the future than it is today. However, in terms of what’s happening with real estate, that is a completely different matter. I hope you’re sitting down because I certainly made some mistakes.

But before we go into that, if you're anything like me, you probably use the new year as a way to set goals, make improvements throughout the next 12 months, and stick with them so that hopefully you don't have to start over again. Now, I’m certainly not perfect when it comes to this, but if I could offer any piece of advice, it's to make sure your objectives are as frictionless as possible.

This means, if you're investing, put your deposits on autopilot. If you’re losing weight, make a predictable gym schedule that you could actually stick to. And if it’s eating better, pick foods that taste just as good without sacrificing nutrition. With that, our sponsor, Hero Bread, is there to help.

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They’ve also just released a brand new recipe using antioxidant-rich olive oil, which has shown to reduce cholesterol and minimize the risks of heart disease. For the last few months, I’ve been using this non-stop as a substitute for store-bought bread on just about everything.

Like every morning, I’ll start my day by toasting some Hero Bread with peanut butter, and for lunch or dinner, I could either make myself a sandwich or grill up their tortillas with vegetables and meat as a way to cut down on processed sugars. To me, I see this as a way to have better-tasting bread than what I would buy at the grocery store. It's significantly healthier, and if you want to start off 2024 with fresh new goals, you could try it out for yourself by going to hero.com or using the link down below in the description with the code GRAHAM to get 10% off your first order. Again, the link is down below in the description to try it out today with the code GRAHAM for 10% off. Enjoy, and thank you so much!

Now let’s get back to the video. All right, now here’s where things get really interesting in terms of the future of the housing market. Look, it’s no surprise the last three years have been incredibly challenging for anyone looking to buy real estate. Like, low interest rates locked in new and existing homeowners, an inventory shortage kept prices high, and interest rate hikes absolutely obliterated home affordability.

But in 2024, that might begin to change. Why? Well, the 30-year mortgage rate is expected to drop as the Federal Reserve once again begins lowering interest rates, or I guess more precisely put, it’s expected that we’re going to see three rate cuts in the next 12 months. There’s also the aspect of significant pent-up demand to buy a property. As the U.S. Census Bureau says, there would be 740,000 more homeowners if the home ownership rate matched the 1990 level. That’s expected to generate many more sales as rates begin to come down throughout 2024.

This is also expected to prompt a lot more homeowners to list their homes for sale once the gap between their existing interest rates and future interest rates begins to narrow. Although in terms of whether or not prices will fall, the general consensus seems to be, unfortunately, no; it’s only going to get more expensive.

In fact, it's said that more inventory will generally be offset by more buyers in the market. As a result, it’s expected that overall the median home price in the U.S. will grow modestly, rising to $394,000 for 2024—a 1.5% increase over 2023. Of course, keep in mind that doesn’t mean that prices everywhere are just going to be going higher, especially since real estate is highly localized.

Larger metros are facing some affordability issues, so areas like Miami, San Diego, Los Angeles, Las Vegas, Tampa, Nashville, and Austin are in the locations likely to see a marginal price decline, while others like Indianapolis, New Orleans, Chicago, Pittsburgh, Detroit, and Louisville could see prices increase as high as 5%.

Now, on the other hand, Redfin believes that median prices will see a drop of 1% in 2024. Zillow thinks we'll see a drop of 0.2%. Morgan Stanley anticipates a price drop of 3%, and JP Morgan believes that affordability could be resolved by the time 2027 comes around.

Now, in terms of what I’m doing, though, I’ll be honest: I have been completely blown away by the strength of the housing market and how resilient it’s been. Like I said back in January of 2022 that I wanted to get back into the real estate market by buying where I live in Las Vegas through some commercial real estate. So, I looked and looked and waited and looked again, and I tried to find a deal that made sense to buy, and I’m still waiting.

Now in hindsight, it seems as though I’ve somewhat made the right choice because commercial real estate values here in Vegas have declined anywhere between 10% and 20%, depending on the property type. But that's also meant that I’ve spent two years trying to find a no-brainer deal to buy, and that deal just has not existed.

On top of that, though, the high-interest rates make a cash flow negative unless you put a lot of money down, and the risk-reward ratio just isn't penciling out unless you’re willing to do a lot of the work yourself. That means I’m going to continue being patient until eventually, hopefully, if I am lucky, the right deal will come along, and make sure to subscribe so I can keep you posted on that.

Finally, we have the last topic that’s worth discussing because people have been asking me non-stop to talk about this, and that would be alternative investments, including Bitcoin. I mean, I think it’s no surprise that I keep a percentage of my portfolio in more speculative alternative investments, including collectibles, cars, and Bitcoin.

I generally have the mentality that if it goes up in value, great, and if it doesn’t, well, that’s okay too. But I also can’t say that I’ve not been paying close attention to what’s going on with Bitcoin because it’s incredibly interesting. Throughout 2023, the price has increased from a low of $16,500 to now more than $42,000, making it one of the highest returning assets of the year.

This in and of itself is quite significant because the average cost basis for investors is shown to be around $33,000, meaning the average investor is now sitting in profit for Bitcoin. On top of that, even the Bitcoin bull MicroStrategy is back in the green with a cost basis of $31,000.

Now in terms of where this could go from here, some analysts believe that the Bitcoin ETF excitement is already priced in, and if it gets approved, prices might begin to fall. But as far as what I think, I have absolutely no idea. I’ve just taken the approach that Bitcoin can make up a small part of my portfolio. I don’t see the harm in buying in on a regular basis with what you could afford to lose, and if you’re going to buy in, it probably helps to have a very long-term outlook.

As far as anything else, though, to be honest, I really haven’t bought any other alternative investments since the beginning of 2020. To me, there is just way too much hype around exotic cars and expensive watches, so I stayed away from that and chose to lose money in individual stocks instead. Just kidding!

But in all seriousness, if I were to make any predictions for this next year, I tend to believe that automobiles still have more room to fall; watches selling obscenely over MSRP makes absolutely no sense to me, and Bitcoin so far has been quite profitable to dollar-cost average into. Time is going to tell how all of these play out for the rest of the year.

Though my entire investing blueprint is really simple: First, go through my expenses and reduce any unnecessary spending. Second, invest on a regular basis, which in my case is every morning at market open. Third, buy and hold for the next 20 years. Fourth, continue buying index funds, which for me is 80% United States and 20% International. Fifth, save cash on the sidelines for a potential real estate investment. Lastly, allocate about 5% of my entire portfolio towards riskier investments.

That's it! It’s really simple, very easy to follow, and the best part about it is that historically, this has shown to have some of the highest returns. Like, besides rotating my 2020 individual stocks into index funds and tax-loss harvesting some positions to minimize my taxes, I really haven’t sold anything since I started investing in the stock market about 10 years ago. In fact, I still have my original S&P 500 index funds that I purchased through Vanguard when the market was trading at 1400, and I have a feeling that we’ll be able to look back 20 years from today and think to ourselves, “Geez, the market was so cheap!” Hopefully, anyway.

Separately, on a more practical level, newer vision showed that American excess savings is way higher than expected, leading to the notion that there’s still plenty of dry powder and money on the sidelines to buy in if the market were to drop. So for all intents and purposes, I am keeping the exact same strategy as usual and changing absolutely nothing for the next year.

So with that said, you guys, thank you so much for watching. As always, feel free to hit the like button, subscribe, and don't forget that you'll be able to get all the way up to a few thousand dollars worth of free stocks when you make a deposit using a paid affiliate link down below in the description. When you sign up, I'll get a commission on that, but you also get some free stocks, so let me know what stocks you get. Thank you so much, and until next time!