What is up guys, this is David and I want to address the age-old question that was pondered about by historians for thousand of years and that is ……How to invest in 2020 ?
I am only joking,of course…
I think this is a very important topic, and the changes that took place are important towards our financial behaviour this year..
So ,we have seen the markets are at their all time-highs……
And interest rates are at their all-time lows…
(Nearly) Everything where you would have invested would have worked
Looking at the general feeling, it seems like it is not even possible to lose money ….
But the reality is that there are a few issues that need to be addressed (and very few people are actually doing it)
The general public tend to lose sight of the fact that the economy is cyclical, and that a time when the investments will go down in value will certainly come, and my fear is that a lot of people will get burned….
So, in order to make sure that does not happen, here I share my personal strategies to have a good year regarding finance A.K.A what I think that the every single investor needs to know to make the most amount of money humanly possible..
So ,just to get you up-to-speed ,we are now in the longest bull-market IN HISTORY SINCE MARCH 2009
And since then then we have seen consistent year-over-year growth -take the a look at this:
This shows that this is better that any economic expansion that we have seen for over 100 years!
There were only 3 other times in history when we came even close,besides the recovery since the Great Depression:
A-The Post War Boom that lasted just over 7 years, with an overall value as you can see below:
B-The second one was in the 80’s and can be seen below:
Then,in the 90’s we had the a period of over 9 years and produced a return of over 391%
And then is the subject of today, our 11 year-old bull market:
And apparently it keeps on going strong,with no end in sight…
Just because we are in an all-time high does not mean that it cannot continue to go even higher!
In 2013- The S&P500 reached an all-time high (1806 dollars per share) …………..
And consequently, people called it a bubble
And, as you might expect, in 2014 the market also hit an all-time high:
And, because of that, people were calling for the upcoming crash
At that time,the S&P 500 was trading for ….
2019 dollars per share!
And,sure enough, the next year,and that is 2015, marked another all-time high..
And ,as usual, there was a lot of noise regarding the next stock market bubble
And that is when the S&P 500 was
2128 dollars per share
and then,in 2016…another one,as DJ Khaled would put it:
Same fears-for another bubble-And the value of a stock for the aforementioned S&P 500 would be:
And then for 2017
and then 2018 and …you guessed it…
Then..2019..Another all-time high…
And that is when the value passed 3000 dollars per share
And we are back again with all-time highs and ..v
S&P500 just barely trailing from its peak of 3329 dollars
As you can see, we can infer a few things from this bull market:
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But,first,this is what we DO know:
1-The market will always and consistently hit all-time highs.
There is nothing new and also 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..Think that ,if you calculate for the last 70 years, the next high was reached at every 16 days.
2.The “EXPERTS” that keep saying year after year that there is going to be a crash simply do not know what are they talking about
Predictions like this are overall rather worthless.
Sure,it might be entertaining, but still worthless none the less,even it might be tempting to think about something that the rest of the world does not
But if you invest based of that info, is the financial equivalent of scratching a lottery ticket in terms of the correctness of the info.
3-What we often overlook is that
There are BEAR markets always next,when these BULL markets came to an end and the prices dropped.
A lot of investors,and especially the newer investors, tend to forget that there bear markets are coming down ..They invest with the mentality that the market should just grow progressively ,year after year…
This is a very bad place to be,where you have OVER INVESTED and find yourself in a BEAR market…
Because I can GUARANTEE that there will be a moment in the future when the market will go down…
And that will be a test of strength-if you have what it takes to continue to hold it,continue to buy ,or to sell.
And ,in terms of what bad times looked like
-The Great Depression -Lasted almost 3 years
And the loss of the market was over 83%
Then,in the 70s,we saw a recession
And the loss of the market was over 42%
The dot.com bubble was very similar,lasting over 2 years
And the loss of the market was over 44%
And the most recent,in 2008,lasted over
1.3 years and the loss in value was over 50%.
I also will throw this in:
Do not get me wrong, I do not think that there will be a recession soon,in fact,far from it…
What I am saying that a loss of over 40% has happened only 4 times in the last 100 YEARS!
But I am not a fan of timing the market.
There have been multiple attempts to do it, but what is the best strategy ,good or bad times?
BUY AND HOLD! This is the most effective strategy out there!
The point of this article is that progressive growth is NOT NORMAL WITHOUT experiencing a recession!
The problem is that people think that investing is easy because everything that they invested in made money..and this will cause people to panic WHEN the market will have a correction!
Even though investing is and should be as easy as buying stocks or index funds and holding them ,it becomes more difficult when the market goes down and ,ON PAPER, you appears that you lose money.
And 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 first think to yourself if your investments dropped 20 to 40 percent tomorrow would you be ok ?
1-Would you be OK if your investments would lose 20-40 tomorrow?
If you would be totally shaken by the money dropped ,then you need to reconsider the amount that you invested, and to try to diversify your investments as much as possible.
Even though we know that ,using the data avaiable , that we need to do
We are emotional and sell in a bad moment,by that I mean when we start to lose money.
Even on 2018,when this happened
You would not believe how many people emailed me saying that they sold their investments AT A LOSS and then are expecting their time to get back in!
Some were even angry at me for suggesting to invest and their investments went down in value!
Obviously,the ones that kept their shares came back on top.
So, when you KNOW that the markets will go down in value,and that is to be expected (AND NORMAL), we can start to realize that it should not be so scary when it does happen.
2-Have a LONG TERM outlook at your investments.
WE might not know what will happen,but what we know is that
Buying and holding for 20 years has never produced a negative result.
In other words, every correction will allow you the time to recover .
From a different point of view, every drop in the stock market should be celebrated,because you can buy at a discount!
Also, if you might need the money for some bills, take a look at your budget,because I offer quite a lot of info regarding this topic here on financial-minimalist.com and only after that you should start to invest.
3-Have a EMERGENCY FUND -3 to 6 months of backup money in case of problems.
You need security-and this fund will allow you just that,
You need them to make you money- That is why you should find a good savings account that will offer a good interest rate.
And you need 3 to 6 months of your average income so that you are prepared not to disrupt your investments because of a job change /divorce/whatever…
This will also allow you to invest in a manner that is not emotional.
4-Get rid of DEBT
Now,while the going is good, you need to get rid of the debt that is taking over your financial life.
- Credit card debt
- Short term mortgages
- Student loans
- Personal loans and so on…
If you pay the high-interest rate now,while the going is good, you are simply reducing your expenses,that allows you to have more cash for your emergency fund and for investments as well.
5-As the title says-How to invest in 2020, regardless of the market
A-Max out your retirement accounts-
Start with the ROTH IRA
This is a retirement account that allows you ,post tax, to invest annually, up to 6.000 dollars a year and any profit generated by this account is going to be TAX FREE after the age of 59.5 years.That means that if you end up with thousands or hundreds of thousands of dollars ,if you take the money after the age of 59.5 , you will not pay a dime in taxes.
Look to contribute to a 401k account-
This is an account where you invest you PRE-tax money and you get taxed only when you take the money out after the age of 59.5..SO you get the opportunity to save more money now, because the amount is PRE-tax.
If your employer will match the amount that you put there ,you are basically getting a x2 money for the same amount.It cannot get any simpler than this.
Regarding the investment topic ,the choice is yours ( I cannot recommend the same to people all over the world ,can I?)
But my usual recommendation is INDEX FUNDS- These funds are broad investments that track the overall market ,so …
I suggest that you buy -US stocks,International stocks and BONDS.
The latter are also important for a complete portfolio!
If you are looking to investment in a INDIVIDUAL STOCK, I must remind you that the likelihood to lose a lot of money is much higher (and the same is true if it all goes up)!
The simple idea is that you must be ok with the risk and must know in what you invest!
The other idea is that you need to look into REAL ESTATE,which is a great alternative for stocks and BONDS!
And you need to be consistent.
So,to recap, there will be a crash ,and yu need to be in the best financial position to earn as much as possible.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at email@example.com
Thank you for reading, feel free to like and SHARE this article with your friends and family !
Until next time…