Why a Stock Market Crash Doesn’t Matter ๐Ÿ’ฒ๐Ÿ’ฒ๐Ÿ’ฒ


The market is on edge lately. Inflation is creeping up, the Federal Reserve
is taking away the easy money policy that was boosting stock prices and the stock market
is at a price-to-earnings it’s only been at twice in history. Everyone is calling for a stock market crash. Here’s something you won’t hear on all
those investing shows, it doesn’t matter! That you need to worry about a stock market
crash is one of the biggest investing lies told to you by Wall Street. I know because I was once part of that Wall
Street machine, an equity analyst predicting the ups and downs of the market. In our third of this five-part series on investing
mistakes and lies, I’m going to show you why a stock market crash doesn’t matter
and what you can do to get the most out of your money. I’ll be revealing two reasons why stock
prices are the least of your worries then give you three rules for investing in any
market, so let’s get started! Hey Joseph Hogue with another video. We’ve got a great video today on one of
the biggest investing mistakes and I want to thank you for spending a little of your
day with me. Stocks do happen to be historically expensive
right now. The price-earnings for the S&P 500 is over
25-tiimes, that’s a high it’s only been at twice before – in 2000 and before the Great
Depression, and neither of those times worked out well for investors. So naturally every pundit and analyst on Wall
Street has an opinion about when the second-longest bull market is going to come crashing down. It’s never a modest correction by the way,
it’s always a call for a cataclysmic plunge because that’s more exciting. I’ve found quotes from just about every
big name investor all the way back to 2011 predicting a stock market crash. But do you ever wonder why these analysts
and investors are never questioned about their predictions when they don’t come true? Why doesn’t anyone call them on it? Because Wall Street loves it! By constantly scaring the bejesus out of you,
by constantly putting you in a panic over stocks, Wall Street knows you’ll keep coming
back, keep watching for every news story and analysis. That means they can sell billions in advertising
and sell you into their brokerage services. You know what Wall Street’s dirty little
secret is, the truth that they won’t tell you on CNBC? Stock market crashes don’t matter! Yes, it sucks to see your investments plunge
by half and it’s great to think that you can get out before it happens, especially
if all it means is regularly tuning in to your favorite investing show. Now if you’re managing someone else’s
money, if you’re an analyst or a financial advisor, then yes stock market crashes matter. You better be a good steward of your client’s
money. But for the 99% of us, those just trying to
meet our long-term financial goals, a stock market crash matters less than you think. Let’s look at two reasons why a stock market
crash doesn’t matter before looking at three rules for investing in any market. First of all, nobody is going to predict when
the stock market is going to crash. There will be lots of people saying they did
after the fact. I’ve seen at least half a dozen money managers
and big investors make a name for themselves, become famous for ‘predicting’ the 2008
financial crash. The thing you don’t hear is that most of
these people were throwing out predictions as early as 2004. It’s ridiculous because you see these people
talking up their generic commentary at least twice a week on Bloomberg or CNBC. They throw out three or four reasons why stocks
might crash but of course they always leave it open by saying something like, if this
happens then the market could keep going or the first half of the year looks solid but
we could run into weakness in the second half. I love that last one. It’s always the second half of the year
that the market is going to be in trouble. That way, if the market does sell off, the
pundit can scream how right they were and if it doesn’t well nobody remembers one
prediction out of the thousands they hear anyway. I don’t care if you’re Bill Miller, Peter
Lynch or Warren Buffett all three of which are spectacular investors but even they can’t
predict a stock market crash. Trying to do so will eat into your returns
by hedging or sitting out the market and you’ll go grey stressing out about stocks. The second reason why stock market crashes
don’t matter, and this is the more important one, is because stocks always rebound. Give me one example of a stock market crash
when the S&P 500 didn’t retake its previous high. It took just five years for stocks to recover
from the massive crash on Black Friday in 1989, seven years after the dot-com bust and
six years to recover from the housing collapse. In every single one of these instances, investors
were putting their money to work at bargain basement prices after the selloff and making
great investments all the way up. The fact is, what stocks do over a few years
just doesn’t matter to your long-term investing plan. So if worrying about a stock market crash
is pointless, how should you invest. Here are two investing rules you can use and
two investments that will help smooth your wealth building even when stock prices fall. First, investing has to be personal. You have to invest according to your personal
goals and needs. This starts with figuring out what your goals
are. If you’re just saving for some arbitrary
number like $1 million then you’re going to fail. You need a real mental picture of what you’re
going to do with the money to keep you motivated to save and invest. Once you’ve got that retirement number,
you can use an investing calculator to find the investment return you need to get there. I’ve actually just developed a great investing
calculator that’s easy to use so I’ll link to that in the description. Making your investing personal is going to
help you in this next stock market rule which is diversifying across different assets. An asset is just a broad group like stocks,
bonds and real estate. Because all the investments in an asset class
share core characteristics, they all react similarly to economic changes. Stocks rise when the economy is good while
bonds do better when the economy weakens. Real estate does well in a low-interest rate
environment and during inflation. Part of making a personal investing plan and
diversifying in these assets is knowing how much to invest according to your age and other
needs. I’ve got a chart for how much stocks, bonds,
real estate and other assets you might want to buy depending on your age. These are just rough estimates because your
own investments will differ according to your tolerance for risk and other needs. But an investor in their 20s might put 60%
in stocks or even more while investing 15% in bonds and 10% in real estate. The other 15% might be in alternative assets
and a little in cash. As you get older, more of your money shifts
to safer investments like bonds and out of stocks. By the time you’re in your 50s, maybe you
have 50% in stocks, 25% in bonds, 15% in real estate and the rest in cash and alternative
investments. This slowly shifting your investments according
to your age, not because you think the stock market is going to crash, is going to keep
your money aligned with your long-term goals and your need for return. Holding some money in bonds and real estate
is going to smooth out those stock market bumps so you don’t freak out when Wall Street
panics. Finally here are a couple of investments that
almost nobody is using right now but will help you worry less about your money but still
make a solid return. Usually, when people start worrying about
a stock market crash, they invest more in bonds. That provides safety but really low returns
and people usually get bored making four or five percent. The pour the money back into stocks and get
creamed when the market tumbles. These alternative investments will help provide
strong returns but are not quite stocks so they aren’t going to plunge with the market. First is real estate crowdfunding. I’ve been investing on RealtyShares and
PeerStreet for a while now and love using crowdfunding to balance my other real estate
investments. I can invest as little as $1,000 in a property
on the two platforms. I get professional management and none of
the headaches of real estate investing. I average around 9% on debt investments and
up to 14% on equity investments. I’ve got a review of real estate crowdfunding
returns you’ll want to check out so I’ll leave that link in the description. The next alternative investment is peer-to-peer
lending on Lending Club. I’ve been in p2p loans since my cousin told
me about them years ago and have averaged just over 10% annual returns. I only invest in loans from very good credit
borrowers, people with mortgages and credit scores over 700 FICO. This helps keep the defaults low and my return
higher. I use the automatic investing tool on Lending
Club so those monthly payments on the loans that I receive are automatically reinvested
keeping my money working for me. I’ve got a review of p2p investing and three
investing strategies for different types of investors that I’ll link to in the description
below. So check out those two alternative investments. I’ve booked double-digit returns on each,
returns that will be safe when the stock market crashes. Yeah, they might not be double-digit but they’re
still going to be positive returns which is damn good compared to a 25% or more loss in
stocks. It’s really as easy as that folks. Stop worrying about a stock market crash. It’s just going to cause you stress and
to make bad investing decisions like panic selling. There’s no point worrying about whether
the market is overpriced. Stocks will fall eventually but they always
make their way higher. Create a personal investing strategy that
focuses on your goals instead of trying to beat the market. Invest in different asset classes like stocks,
bonds, real estate and peer loans according to your age and return needs. Make your money work for you and enjoy life. We’re here every Monday through Wednesday
with a new video about beating debt, making more money and making your money work for
you. If you liked this video, please give it a
thumbs up and let me know in the comments. If you’ve got a money question, subscribe
to the channel and go to mystockmarketbasics.com/ask and I’ll answer it in a future video.

10 Replies to “Why a Stock Market Crash Doesn’t Matter ๐Ÿ’ฒ๐Ÿ’ฒ๐Ÿ’ฒ”

  1. Are you worried about a stock market crash in 2018? Why do you think stocks will fall or not this year?

  2. If the stock market crashes, I will just buy more stocks of dividend growth companies that have good solid fundamentals. I havenโ€™t tried P2P lending and Real Estate crowdfunding. I heard about them. I have been thinking about FundRise. Do you think this is a good platform to invest in real estate?

  3. One rule I follow is to only sell once I've made money. This is a simple rule and it works as all investments go up be it very slowly.

  4. What are your thoughts on Stop Losses? I used to use them but would get knocked out of stocks just to watch it rebound. Also I felt if that stock dropped to that level it would be a buy. Perhaps a video on this topic?

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