2022-05-09-How_To_Respond_to_Turbulent_Markets
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00:00:30.000 | Buckle up, ladies and gentlemen.
00:00:31.000 | Today I'm going to tell you how to respond when markets crash.
00:00:34.000 | ♪
00:00:50.000 | Welcome to Radical Personal Finance,
00:00:51.000 | a show dedicated to providing you with the knowledge,
00:00:53.000 | skills, insight, and encouragement you need
00:00:55.000 | to live a rich and meaningful life now
00:00:57.000 | while building a plan for financial freedom
00:00:59.000 | in 10 years or less.
00:01:01.000 | My name is Josh Rasheeds.
00:01:02.000 | I am your host, and today, well,
00:01:03.000 | bumpy road in the stock market,
00:01:05.000 | bumpy road in the crypto markets,
00:01:06.000 | bumpy road in real estate.
00:01:09.000 | What do you do when markets crash?
00:01:12.000 | Let's talk about it.
00:01:13.000 | ♪
00:01:22.000 | As I record this podcast today,
00:01:24.000 | it is Monday, May 9, 2022,
00:01:27.000 | and across the board,
00:01:29.000 | it is a rough go in terms of declining prices.
00:01:35.000 | For today, I just pulled up the numbers for today.
00:01:37.000 | S&P 500 down 3.2% to close today at 3,991 points.
00:01:42.000 | NASDAQ down 4.3% to close at 11,623 points.
00:01:47.000 | Gold down 6.2% to close at $1,852.
00:01:52.000 | Let's pull up Bitcoin.
00:01:54.000 | Bitcoin, USD, the exchange ratio between
00:01:58.000 | Bitcoin tokens and U.S. dollar tokens,
00:02:00.000 | 31,054 U.S. dollar tokens to Bitcoin.
00:02:05.000 | What do you do when markets crash?
00:02:09.000 | Today, I want to help you think through that,
00:02:12.000 | and I'm going to give you the answer right now.
00:02:15.000 | Let me turn off the music,
00:02:16.000 | so I'll give it to you right now,
00:02:17.000 | and then I'm going to expand on that answer
00:02:19.000 | with some specific applications.
00:02:21.000 | What do you do when markets crash?
00:02:25.000 | Well, the answer is you respond to the market crash
00:02:30.000 | according to your pre-existing strategy.
00:02:34.000 | That's it. There's the show.
00:02:36.000 | You respond to the market crash
00:02:38.000 | according to your pre-existing strategy.
00:02:41.000 | Whatever your strategy is
00:02:43.000 | with regard to your investment portfolio,
00:02:46.000 | then you follow that strategy
00:02:49.000 | that you have created during times
00:02:51.000 | that were not emotional,
00:02:52.000 | during times that were not filled with fear or euphoria,
00:02:56.000 | and you follow that strategy
00:02:58.000 | based upon the numbers that are being presented to you.
00:03:02.000 | You say, "But Joshua, I don't know how to respond
00:03:04.000 | according to that strategy."
00:03:05.000 | Well, there is your problem.
00:03:08.000 | I'm not saying that to be glib
00:03:09.000 | or to try to rub it in,
00:03:10.000 | but there is your problem.
00:03:12.000 | You must respond to market changes
00:03:15.000 | based upon your pre-existing strategy.
00:03:17.000 | I'm going to give you in today's show
00:03:19.000 | a wealth of examples to drive this home,
00:03:21.000 | and I hope that by the end of this recording,
00:03:24.000 | you will have some idea of what to do.
00:03:28.000 | By the way, to the sponsor of today's show,
00:03:30.000 | internationalescapeplan.com.
00:03:34.000 | One of the ways that internationalescapeplan.com
00:03:39.000 | can be useful to you
00:03:41.000 | is providing a component of your overall strategy
00:03:45.000 | of how to even do things like save money
00:03:48.000 | during times that are difficult.
00:03:50.000 | I've told this story many times,
00:03:51.000 | but I want to repeat it.
00:03:52.000 | Years ago, I had an interesting experience
00:03:55.000 | where I had a client of mine
00:03:57.000 | who ran a drywall company.
00:03:59.000 | The time that I met him, it was 2010,
00:04:02.000 | and he had been in the construction industry
00:04:03.000 | in South Florida.
00:04:05.000 | The construction industry in South Florida
00:04:07.000 | had utterly collapsed in 2008, 2009, 2010,
00:04:11.000 | and he had no business.
00:04:13.000 | What was interesting, I came along
00:04:15.000 | as a financial planner at the time,
00:04:17.000 | wanting him to work with me.
00:04:20.000 | It turned out that I didn't have very much
00:04:22.000 | to offer him, but he had a whole lot to offer me.
00:04:25.000 | His comment to me was, he said,
00:04:26.000 | "Joshua, this has been," I forget,
00:04:27.000 | "my third or fourth recession,
00:04:29.000 | "and I've learned a little bit along the way
00:04:30.000 | "of how to respond to recessions."
00:04:32.000 | And so what he had done in his business
00:04:34.000 | was he had parked all of his trucks,
00:04:36.000 | he had laid off all of his employees,
00:04:38.000 | he had one part-time administrative staff member
00:04:41.000 | who was answering the phones when they rang,
00:04:43.000 | and he had pulled everything back
00:04:45.000 | to the bare minimum, and he was going fishing every day.
00:04:48.000 | And he didn't borrow any money from anybody,
00:04:51.000 | he was completely debt-free,
00:04:52.000 | he had no overhead, and he had plenty of cash reserves,
00:04:56.000 | and so he went fishing every day.
00:04:57.000 | He said, "I've learned over the years
00:04:59.000 | "that it's easier to make money
00:05:01.000 | "when you just simply follow the markets,
00:05:02.000 | "and it's easier to take a vacation
00:05:03.000 | "rather than worrying about how do I make money
00:05:05.000 | "in a dead market?"
00:05:06.000 | And he'd actually bought a brand-new fishing boat
00:05:08.000 | from some guy who was in over his head
00:05:10.000 | and he bought a $100,000 boat for 40 grand
00:05:13.000 | or something like that,
00:05:14.000 | I don't remember the exact numbers,
00:05:16.000 | and he was going fishing and enjoying his lifestyle.
00:05:19.000 | And over the years, I've thought of him
00:05:20.000 | again and again and again,
00:05:22.000 | and I've realized that life is easier
00:05:24.000 | when you don't fight against the tides.
00:05:26.000 | If you've ever gone out and rowed a boat,
00:05:31.000 | rowed a canoe or something like that,
00:05:33.000 | and figured out that if you have to fight
00:05:34.000 | against the current or fight against the tides,
00:05:36.000 | it's really difficult.
00:05:37.000 | But if you simply time your life
00:05:39.000 | in accordance with the tides,
00:05:41.000 | then things can work really, really well.
00:05:43.000 | How does this relate to internationalskateplan.com?
00:05:46.000 | There are times in your life
00:05:47.000 | at which it might be better for you
00:05:49.000 | to just leave the country.
00:05:52.000 | Now, I talk a lot about doing that
00:05:53.000 | in times of emergency, right?
00:05:55.000 | Maybe you are facing hyperinflation
00:05:57.000 | like they're facing in Argentina or Turkey right now,
00:06:00.000 | and you decide, "You know what?
00:06:01.000 | "I'm gonna get out for a while,
00:06:02.000 | "and I'm gonna go somewhere else
00:06:03.000 | "where I don't have to deal with this hyperinflation."
00:06:05.000 | Maybe, though, it's just simply business is dead
00:06:08.000 | and, "You know what?
00:06:09.000 | "I'd like to go ahead and just take it easy for a year."
00:06:12.000 | Well, now, all of a sudden,
00:06:13.000 | renting out your house
00:06:14.000 | so that you cover your mortgage payment
00:06:16.000 | and going to a cheap country
00:06:17.000 | that you had already decided that you liked
00:06:19.000 | might be useful.
00:06:20.000 | Internationalskateplan.com is much more intended
00:06:22.000 | to help you prepare for an acute situation
00:06:24.000 | when you have to leave
00:06:25.000 | because the cops knocked on your door and said,
00:06:30.000 | "Were you in this place at a certain time?"
00:06:31.000 | and you're not so sure
00:06:32.000 | if you really want to answer that
00:06:34.000 | or whether you want to have your lawyer answer that
00:06:35.000 | while you are on the other side of the world.
00:06:37.000 | Or you're just not sure about
00:06:40.000 | whether it's safe to be in your country right now
00:06:42.000 | and you might want to be in a country
00:06:43.000 | that's safer for a period of time.
00:06:45.000 | But if you would like to have
00:06:47.000 | an international skate plan
00:06:48.000 | and you would like to know how to build it
00:06:50.000 | in a simple, sensible, non-freak-out, non-dumb way
00:06:55.000 | where you don't overcommit to something
00:06:56.000 | and you just systematically build up your ability
00:06:59.000 | to live freely
00:07:01.000 | if things don't go great in your home country,
00:07:03.000 | go to internationalskateplan.com
00:07:05.000 | and sign up for that course.
00:07:07.000 | I promise, well worth the money.
00:07:10.000 | So let's go back to markets.
00:07:12.000 | How do you respond to a market crash?
00:07:13.000 | I gave you the answer, right?
00:07:14.000 | You respond according to your pre-existing strategy.
00:07:17.000 | And again, my goal is not to embarrass you by saying that
00:07:21.000 | but to say that if you're not responding
00:07:22.000 | according to your pre-existing strategy,
00:07:24.000 | therein lies your major mistake.
00:07:28.000 | Market crashes in every market everywhere are inevitable.
00:07:33.000 | That's what markets do.
00:07:35.000 | Now of course that word crash is very subjective.
00:07:37.000 | What does it mean?
00:07:38.000 | Does it mean a 5% change in markets up and down?
00:07:40.000 | Does it mean a 25%?
00:07:42.000 | It's not a defined term.
00:07:44.000 | We have good technical definitions
00:07:46.000 | that we use for bear markets and bull markets.
00:07:49.000 | We have good technical definitions
00:07:50.000 | that we use for recessions and depressions.
00:07:52.000 | But crash is just one of those evocative, scary words
00:07:55.000 | that doesn't actually give you any ability to respond.
00:07:58.000 | So I'm using it to evoke the emotion
00:08:01.000 | without getting into the details
00:08:02.000 | because the details don't matter.
00:08:04.000 | The point is before you ever invest money,
00:08:06.000 | you should have some kind of plan
00:08:08.000 | and some kind of system.
00:08:12.000 | So where's your starting point?
00:08:13.000 | Well, the starting point is to say,
00:08:15.000 | "Am I a long-term buy and hold investor
00:08:17.000 | or do I have a trading strategy of some kind?"
00:08:21.000 | I think the best, most sensible way
00:08:23.000 | for people to invest their money
00:08:26.000 | is to be a long-term buy and hold investor.
00:08:30.000 | Now that applies whether you're investing
00:08:32.000 | into mutual funds or stocks in your retirement account.
00:08:36.000 | That applies whether you're investing into real estate.
00:08:39.000 | That applies whether you're investing into Bitcoin.
00:08:42.000 | All of these can work well
00:08:44.000 | for a long-term buy and hold investor.
00:08:48.000 | How do you know if you're a long-term buy and hold investor?
00:08:51.000 | Well, the way you know that is you look
00:08:53.000 | at the investment asset that you're buying
00:08:55.000 | and you ask yourself,
00:08:56.000 | "Do I believe that this investment asset
00:08:58.000 | is a quality asset for me to hold for a long time?"
00:09:02.000 | And you should know that somewhat intuitively.
00:09:06.000 | If I point across the street
00:09:09.000 | and I show you a good, solid three- or four-bedroom house,
00:09:14.000 | two or three bathrooms, couple cars,
00:09:16.000 | couple car garage on a nice residential street
00:09:20.000 | with good, big, mature trees,
00:09:23.000 | you know it's safe,
00:09:24.000 | you see some children playing here and there,
00:09:26.000 | you see some nice cars parked in the driveway,
00:09:28.000 | and I ask you,
00:09:29.000 | "Do you think this is a good asset for you to own?"
00:09:32.000 | The answer should be fairly obvious,
00:09:34.000 | fairly intuitive.
00:09:35.000 | You look at it and say,
00:09:36.000 | "Yeah, I think this is a good asset for me to own."
00:09:39.000 | Why?
00:09:40.000 | Why do you think that's a good asset for you to own?
00:09:42.000 | Well, the answer is it's always the kind of asset
00:09:44.000 | that's going to be in demand.
00:09:46.000 | If you look and you can see a nice house
00:09:48.000 | that you yourself would be willing to live in,
00:09:50.000 | then it's easy to imagine
00:09:51.000 | that other people would also want to live in that house.
00:09:56.000 | It's obvious that,
00:09:57.000 | "Hey, you know what?
00:09:58.000 | "If I would live in that house,
00:09:59.000 | "somebody else would probably live in that house,
00:10:01.000 | "and people need a place to live."
00:10:03.000 | Now, compare that to my taking you outside of town,
00:10:08.000 | wrong side of the railroad tracks,
00:10:10.000 | old, run-down, broken-down house,
00:10:12.000 | and I say to you,
00:10:13.000 | "Is this a good investment?"
00:10:15.000 | Well, you would look at that and you would say,
00:10:17.000 | "I'm not so sure if it is.
00:10:19.000 | "Maybe it could be made a good investment.
00:10:21.000 | "There might be some speculation available.
00:10:24.000 | "Maybe I could buy that old house,
00:10:25.000 | "and I could fix it up,
00:10:26.000 | "and I could rent it to somebody
00:10:27.000 | "who doesn't mind living on the wrong side of town.
00:10:30.000 | "Maybe something's going to change
00:10:32.000 | "that's going to make this the right side of town.
00:10:34.000 | "You know, there's going to put in a new highway,
00:10:36.000 | "or there's going to put in a new housing development,
00:10:38.000 | "or something's going to happen.
00:10:39.000 | "They're going to get rid of the railroad tracks,
00:10:41.000 | "and now this dividing line is no longer there."
00:10:45.000 | That's a speculation.
00:10:46.000 | That's a trade.
00:10:47.000 | That's where you're looking at it and you're saying,
00:10:49.000 | "I could own it until."
00:10:52.000 | This is the basic difference that I see,
00:10:54.000 | just put in very simple terms,
00:10:55.000 | between somebody who's a long-term buy-and-hold investor
00:10:58.000 | versus somebody who wants to trade it.
00:11:01.000 | If you look at an asset that you own,
00:11:03.000 | and you say, "I think this is a good, high-quality asset,"
00:11:05.000 | then chances are that if you buy it,
00:11:08.000 | things are probably going to work out.
00:11:10.000 | Think about that house.
00:11:12.000 | Think about all of the market crashes
00:11:14.000 | that you've lived through in real estate.
00:11:16.000 | If you bought that house,
00:11:18.000 | it's a good-quality house in a good part of town,
00:11:21.000 | on a good, safe street, with trees growing up, etc.
00:11:24.000 | If you bought that house,
00:11:26.000 | can you think of any time
00:11:28.000 | at which you would have lost your shirt on that investment
00:11:31.000 | if you held it for a few years?
00:11:34.000 | It's hard to think of any.
00:11:36.000 | Even in the most vicious real estate markets,
00:11:39.000 | declines, etc.,
00:11:41.000 | generally speaking,
00:11:43.000 | if you can have at least a few years
00:11:45.000 | to hold on to a piece of property,
00:11:47.000 | you can always sell it and get your money out.
00:11:49.000 | Wait a few more years, you can usually sell it
00:11:51.000 | and get a bigger profit.
00:11:55.000 | Usually, that house is in high demand.
00:11:59.000 | Now, the same thing doesn't occur
00:12:01.000 | with that more speculative house,
00:12:03.000 | the more run-down, ramshackle house.
00:12:05.000 | With there, your speculation,
00:12:07.000 | "Eh, I'm not so sure. Maybe this part of town is really dead.
00:12:10.000 | Maybe this city is really dead and falling apart.
00:12:12.000 | Maybe the country is really dead and falling apart."
00:12:14.000 | But if you buy quality houses
00:12:17.000 | in virtually any town,
00:12:19.000 | really in virtually any country,
00:12:21.000 | good chance they're okay, they're quality.
00:12:24.000 | Now, what about the businesses that you own?
00:12:26.000 | Because that's fundamentally what you own
00:12:28.000 | if you own stocks or if you own shares of,
00:12:30.000 | portions of stock within your mutual fund.
00:12:33.000 | What about those businesses?
00:12:35.000 | If I bring you to a high-quality,
00:12:38.000 | old, well-run business in your town,
00:12:41.000 | and I say, "Hey, would you like to be an owner of this business?"
00:12:44.000 | What would you do?
00:12:45.000 | You'd look around and you'd say,
00:12:47.000 | "Well, do we have customers?
00:12:49.000 | Do we have business? Do we have employees?
00:12:51.000 | Do we have facilities?
00:12:52.000 | Do we have plants and equipment?
00:12:55.000 | And if so, then yeah, I'd probably like to be an owner."
00:12:58.000 | Now, we don't know exactly the terms,
00:13:00.000 | but a good, high-quality business
00:13:02.000 | is the kind of thing that you want to own.
00:13:04.000 | And so, if I say,
00:13:07.000 | "And if you buy that business,
00:13:09.000 | can you imagine, in most cases,
00:13:12.000 | that business not being worth what you paid for it in a few years?"
00:13:16.000 | Certainly, some businesses can be in the decline,
00:13:20.000 | but if you own a business
00:13:23.000 | that's a high-quality business,
00:13:25.000 | then, generally speaking,
00:13:28.000 | you're going to want to keep owning it.
00:13:30.000 | Because even if you can't sell it for as much as
00:13:32.000 | you'd like to sell it for today,
00:13:34.000 | in a few years, you'll be able to sell it.
00:13:36.000 | At least get your money out, in most cases.
00:13:39.000 | So, how do you...
00:13:42.000 | So now, if we flip it around,
00:13:44.000 | like, let's say that I take you across town
00:13:46.000 | and I show you some brand-new business
00:13:48.000 | that's more of a speculation,
00:13:50.000 | brand-new industry or brand-new concept,
00:13:53.000 | brand-new idea, maybe a brand-new business manager,
00:13:56.000 | brand-new staff, something like that.
00:13:58.000 | Or, in an industry where it's kind of questionable,
00:14:02.000 | and I say, "Do you want to just buy this and own it
00:14:04.000 | and put it away for the next 10 years?"
00:14:07.000 | You're not so sure.
00:14:09.000 | So, that's more of a speculation, more of a trade.
00:14:12.000 | Whereas the first one, you're well-suited,
00:14:14.000 | just buy and hold.
00:14:16.000 | And although I'm kind of thoughtful about
00:14:19.000 | wanting to take it to the crypto markets,
00:14:22.000 | this is basically the argument that people make
00:14:24.000 | about the difference between Bitcoin
00:14:26.000 | and some other competing currencies.
00:14:29.000 | Is that, do you want to buy something that is stable
00:14:32.000 | versus do you want to buy something that is more speculative?
00:14:35.000 | And I'm going to try to minimize my conversation there,
00:14:37.000 | but I wanted to mention it because, of course,
00:14:39.000 | massive declines recently and big down prices
00:14:42.000 | in many of the crypto markets.
00:14:45.000 | So, if you're a buy and hold investor,
00:14:49.000 | what is the basic thing you need to know
00:14:52.000 | about your investments in order for you
00:14:55.000 | to be comfortable holding them during times of fluctuation?
00:14:59.000 | You need to know that they are good quality investments.
00:15:03.000 | You need to know that you bought a good house.
00:15:06.000 | Yeah, it might need a new roof, but at its core,
00:15:08.000 | it's a good house, it's got good bones.
00:15:10.000 | You need to know that it's a good company.
00:15:12.000 | Yeah, we might have to tweak management a little bit
00:15:15.000 | or tweak our product line, but fundamentally,
00:15:17.000 | it's a good company.
00:15:18.000 | It's not just some fly-by-night operation.
00:15:21.000 | It's a good company.
00:15:23.000 | Now, most of us are not out just buying individual houses
00:15:26.000 | or just buying individual companies,
00:15:28.000 | although that can work fine.
00:15:30.000 | If I myself owned a portfolio of two or three
00:15:34.000 | high-quality companies, publicly traded companies,
00:15:37.000 | the stocks, I mean, the stocks of these companies,
00:15:39.000 | I could sleep very well at night.
00:15:41.000 | Now, of course, people worry about that.
00:15:44.000 | They say it's not enough diversification.
00:15:46.000 | At its core, I've always been a little skeptical of that.
00:15:49.000 | I really have been.
00:15:51.000 | Are you going to tell me that if I own shares
00:15:54.000 | in a high-quality company,
00:15:56.000 | that that's not enough diversification for me?
00:15:59.000 | If you think about in the modern world
00:16:01.000 | what company ownership represents,
00:16:05.000 | you pick your favorite company.
00:16:07.000 | It can be an old, traditional company.
00:16:10.000 | It can be a new, modern tech company.
00:16:12.000 | You pick your favorite company
00:16:13.000 | and think about what that company owns.
00:16:15.000 | Well, if it's something that's on your radar screen
00:16:18.000 | and if it's a publicly traded stock that's easy to buy,
00:16:21.000 | there's a good chance that company has thousands
00:16:23.000 | and thousands of people that work for it.
00:16:25.000 | Those thousands and thousands of people
00:16:27.000 | have a lot of really smart people among them
00:16:30.000 | who come to work every day trying to figure out
00:16:32.000 | how do we make this company grow?
00:16:34.000 | How do we make it more profitable?
00:16:36.000 | How do we serve our clients better?
00:16:38.000 | The company probably has income from across the world
00:16:41.000 | in lots of different currencies.
00:16:44.000 | They have operations in many different countries.
00:16:46.000 | They own equipment. They own real estate.
00:16:48.000 | They own trucks. They own trains. They own planes.
00:16:50.000 | They own equipment in all kinds of different countries.
00:16:53.000 | And that company fundamentally is a really, really solid thing.
00:16:58.000 | I always find it funny, or I still find it funny,
00:17:01.000 | when a guy with one job and just little savings
00:17:06.000 | comes along and says, "Well, it's risky to have one stock."
00:17:09.000 | Now, I grant the argument.
00:17:11.000 | Having just one stock of one company
00:17:13.000 | is a bit risky for my taste.
00:17:16.000 | But at its core, owning stock in one company
00:17:19.000 | is far less risky than having only one job.
00:17:22.000 | Especially if we're talking about a big, publicly traded company.
00:17:25.000 | Yeah, there might be big fluctuations in price,
00:17:28.000 | but imagine the biggest crash,
00:17:30.000 | and you go from a 50% crash in the stock value.
00:17:35.000 | It's still a lot easier to lose a single job.
00:17:38.000 | So what do you do?
00:17:39.000 | Well, you diversify your investments
00:17:41.000 | if you're a buy-and-hold investor.
00:17:43.000 | You purchase more than one company's stock.
00:17:45.000 | Maybe it's three. Maybe it's five. Maybe it's ten.
00:17:49.000 | Ten is a really good benchmark.
00:17:51.000 | Having no more than 10% of your assets
00:17:53.000 | invested in any one company or any one thing
00:17:56.000 | is a pretty good, useful benchmark to work towards.
00:18:00.000 | Maybe it's literally thousands.
00:18:02.000 | Most of my listeners will own mutual funds.
00:18:05.000 | Many of those mutual funds will have ownership
00:18:07.000 | in hundreds, in some cases thousands, of different companies.
00:18:11.000 | Thousands of companies.
00:18:13.000 | So take everything that I said about a great company
00:18:16.000 | and multiply that times hundreds of different scenarios.
00:18:20.000 | You have hundreds of different markets,
00:18:22.000 | hundreds of different industries.
00:18:24.000 | Now you're not just dependent on one industry,
00:18:27.000 | but now you have hundreds of industries represented.
00:18:30.000 | And then all of those same multiplier effects that I mentioned
00:18:33.000 | in terms of operations in hundreds of different countries in the world,
00:18:38.000 | markets, hundreds of little markets,
00:18:40.000 | hundreds of different kinds of currencies
00:18:43.000 | that we're accepting as payment for our business,
00:18:46.000 | hundreds of different pieces of real estate in dozens of countries,
00:18:52.000 | thousands of workers spread all around the world.
00:18:55.000 | So we're pulling from the best global talent in the world.
00:18:58.000 | And now you see the world of modern business.
00:19:00.000 | It's spectacular.
00:19:02.000 | It's utterly spectacular in terms of the simple and easy access
00:19:06.000 | to high-quality companies,
00:19:07.000 | the best companies of America and the world
00:19:09.000 | available to you for mere pennies.
00:19:13.000 | And your ownership in those companies represents a tiny fractional share
00:19:17.000 | in the current and future profits and dividends of those companies.
00:19:22.000 | That's what it reflects.
00:19:27.000 | If any of this resonates with you,
00:19:29.000 | then you'll know what to do as a buy-and-hold investor.
00:19:33.000 | The answer is you go forward.
00:19:36.000 | Now what gets a buy-and-hold investor excited?
00:19:41.000 | The answer is to be able to buy high-quality assets that are on sale.
00:19:46.000 | So if there are things that you want, right?
00:19:48.000 | Imagine that really nice house across the street.
00:19:51.000 | It was listed for $600,000 a few months ago.
00:19:56.000 | Didn't sell, didn't sell.
00:19:57.000 | They dropped the price to $550,000.
00:19:59.000 | Now they just put a sign out and said $475,000.
00:20:02.000 | Well, man, you get pretty excited, right?
00:20:05.000 | You start working the numbers.
00:20:06.000 | You say, "Can I buy that thing for $475,000?"
00:20:09.000 | Imagine that you had a company that you were excited that it was on sale previously
00:20:15.000 | at $20 a share.
00:20:18.000 | Now it's down to $18.
00:20:20.000 | Now it's down to $15.
00:20:23.000 | Now it's down to $13.50.
00:20:24.000 | What do you do?
00:20:26.000 | Well, you round up as much money as you can.
00:20:28.000 | You buy as much as you can.
00:20:30.000 | Imagine you were excited about Bitcoin at $50,000 U.S. token coins per Bitcoin.
00:20:37.000 | Well, now it's down to $30,000.
00:20:41.000 | You look around and you say, "Can I scratch around?
00:20:43.000 | Can I come up with any loose change and pick up a little bit more?"
00:20:48.000 | That's the mentality that you should have if you're buying quality assets.
00:20:54.000 | You buy quality assets and you buy as much of them as you can when they are on sale.
00:21:01.000 | Why?
00:21:03.000 | Because if you're buying quality assets, it's hard to imagine that in the coming years
00:21:09.000 | other people won't see the same value that you see in those quality assets.
00:21:16.000 | Five years from now, 10 years from now, 50 years from now, the idea is you'll still own
00:21:22.000 | those assets and you can sell them at any point along the way that you want to sell them.
00:21:27.000 | That's the basic fundamental logic of being a buy-and-hold investor.
00:21:35.000 | A buy-and-hold investor should stay the course during times when markets are down
00:21:42.000 | and that buy-and-hold investor should buy as much more as he possibly can during times
00:21:48.000 | when markets are down.
00:21:51.000 | When high-quality assets are on sale, buy as many of them as you can.
00:21:57.000 | We'll get to trading in a moment, but you say, "Joshua, I'm not so sure.
00:22:03.000 | Why are all the high-quality investments down in value?
00:22:07.000 | Why? What's going on?
00:22:09.000 | Why do other people not see what I see?
00:22:11.000 | Why are they willing to sell me their $600,000 house for $475,000 today?"
00:22:17.000 | In the case of the individual house, you walk across the street and you ask them,
00:22:23.000 | "Why are you selling the $600,000 house for $475,000?"
00:22:26.000 | They'll usually tell you, "Well, we want to do this.
00:22:30.000 | We need the money because of that.
00:22:32.000 | We don't care about it because of this."
00:22:35.000 | People have all kinds of reasons to sell.
00:22:37.000 | "I'm getting divorced. Dad died and we're just selling the house.
00:22:39.000 | None of us want it.
00:22:40.000 | We really want to buy a business that we think is going to make us $475,000 a year
00:22:45.000 | and we'd rather trade our $475,000 house out quick so we can buy this business."
00:22:49.000 | Any number of reasons.
00:22:51.000 | Or, "We just want to move. We don't like the house anymore and we don't need the money.
00:22:54.000 | It's not a big deal. It's not worth hanging on.
00:22:56.000 | We're tired of it. It's got termites. Who knows?"
00:22:59.000 | What about big-scale markets like the stock market that's hard to figure out?
00:23:05.000 | Well, the answer there is you've got millions and millions of people
00:23:11.000 | making independent, different decisions as to why they think they're willing to sell you these assets
00:23:18.000 | that yesterday were priced at $20 a share and today they're willing to sell it to you for $15 a share.
00:23:23.000 | Some of those reasons can be personal.
00:23:25.000 | "Need the money. Got to sell. Just got to sell."
00:23:28.000 | Some of those reasons can be based upon their trading strategy.
00:23:30.000 | "Got to cover an option that I wrote," or "I got to figure out some way to pay for my kid's college."
00:23:39.000 | But the point is that you have to recognize that there's really no way to know.
00:23:46.000 | The Wall Street Journal will report every day, or All Things Considered will report every day,
00:23:51.000 | and will say, "Markets moved down because of fears of inflation,"
00:23:54.000 | or "Markets moved down because of interest rate risks."
00:23:58.000 | There's certainly probably some predictive factor to that,
00:24:01.000 | but overall it's completely unknowable.
00:24:05.000 | The market is literally just an approximation of the net results
00:24:11.000 | of millions and millions of different decisions.
00:24:15.000 | Remember that for every seller there's a buyer.
00:24:17.000 | For every buyer there's a seller.
00:24:19.000 | And so for everyone who sold, somebody bought.
00:24:22.000 | And those prices just kind of wander around.
00:24:24.000 | And some days you can think you know why those prices are what they are,
00:24:28.000 | and some days you can't know.
00:24:30.000 | Some days it makes sense to you, some days it doesn't make sense to you.
00:24:33.000 | But you just stay the course.
00:24:36.000 | So if you're a buy-and-hold investor,
00:24:39.000 | then your strategy is simply to try to buy high-quality assets
00:24:43.000 | and hold them for a really long time, preferably forever,
00:24:48.000 | and buy more of them when they're cheap.
00:24:51.000 | So how do you buy more of them when they're cheap?
00:24:53.000 | Well, this is usually known as dollar-cost averaging.
00:24:56.000 | One of the basic things that you can do is you just say,
00:25:00.000 | "Hey, every month I can afford to invest $2,000 a month.
00:25:03.000 | So I'll just buy $2,000 a month."
00:25:05.000 | And when things are expensive, you naturally buy a little less.
00:25:08.000 | If stocks are $20 a share, you can't buy as much as you can when they're $15 a share.
00:25:13.000 | And so if you invest the same amount of money over time,
00:25:15.000 | then you are able to buy more.
00:25:24.000 | What if you're not so sure of the value of your investments?
00:25:33.000 | We'll come to that in a moment.
00:25:35.000 | Now let's talk about trading.
00:25:37.000 | When it comes to trading, there is an infinite variety
00:25:41.000 | of different strategies that you can follow as a trader.
00:25:46.000 | There are traders that own stocks for a few nanoseconds.
00:25:50.000 | There are traders that own stocks for a few minutes, few hours,
00:25:52.000 | few days, few weeks, few months.
00:25:55.000 | With real estate, there is an infinite variety of different trading strategies
00:25:58.000 | that you can use.
00:26:00.000 | You can fix places up and sell them.
00:26:02.000 | You can flip contracts, all kinds of things that you can do.
00:26:06.000 | So as a trader, what you're looking for is trades that meet your parameters.
00:26:15.000 | It's hard for me to talk about trading in any kind of useful way
00:26:18.000 | when I speak about it in a general way.
00:26:21.000 | What you need to simply remember is that traders can use strategies
00:26:26.000 | that work for them when markets go up.
00:26:29.000 | Traders can use strategies that work for them when markets go down.
00:26:33.000 | You can make money in any direction on a move.
00:26:37.000 | And so a trader has to understand his specific strategy
00:26:42.000 | and then follow it as the actual opportunities emerge.
00:26:50.000 | I can't cover that in a generalized way,
00:26:52.000 | but if you're a trader, you already know your plans.
00:26:57.000 | If you put a stop loss on your stocks because that was your trading strategy,
00:27:03.000 | then those stop losses were triggered.
00:27:05.000 | If you are following some kind of short-term holding pattern,
00:27:09.000 | you follow your indicators.
00:27:12.000 | You can't look at the general market.
00:27:14.000 | You follow your indicators for your specific strategy.
00:27:18.000 | I think at least 80% of people will be more naturally well-suited
00:27:23.000 | to being buy-and-hold investors than to follow any kind of trading strategy.
00:27:28.000 | It's not that trading strategies, in my opinion, are bad or wrong or flawed,
00:27:33.000 | but rather that most people just aren't interested enough to follow it.
00:27:38.000 | I have known this about myself for a very long time.
00:27:40.000 | I really enjoy finance. I love finance.
00:27:43.000 | I am bored silly with the idea of trading.
00:27:46.000 | I'm temperamentally suited to be a buy-and-hold investor,
00:27:50.000 | to buy good quality investments and hold them forever.
00:27:53.000 | When I need money, borrow against them, then pay off the debt
00:27:56.000 | and just keep on holding them.
00:27:57.000 | As they grow in value, take a little bit of the value, spend it,
00:28:00.000 | and just hold it forever.
00:28:01.000 | It fits my temperament, fits my goals,
00:28:03.000 | and so trading strategies have just never, ever been an interest of mine.
00:28:07.000 | I acknowledge it can work, but if they're an interest of yours, follow that.
00:28:11.000 | But there's a lot of people who think that they should all of a sudden switch
00:28:15.000 | from being a buy-and-hold investor to being a trader
00:28:17.000 | just because they somehow perceive something different.
00:28:22.000 | People have been sounding all--
00:28:23.000 | Let's go back to the safety of what if things have changed?
00:28:27.000 | What are the concerns that people have right now?
00:28:29.000 | Well, a big concern is inflation.
00:28:33.000 | But what's actually changed about inflation in the last year
00:28:37.000 | in terms of the predictions versus not?
00:28:40.000 | We've got real numbers, but the predictions on inflation
00:28:44.000 | have held pretty true over the last year.
00:28:47.000 | So time will follow through.
00:28:50.000 | And so you don't have--as far as I can tell,
00:28:53.000 | you don't have any unique insight on the situation.
00:28:56.000 | I don't have any unique insight on the situation.
00:28:58.000 | We're all in it together.
00:28:59.000 | It just kind of presses forward.
00:29:01.000 | And so the markets are going to wander around,
00:29:03.000 | but is the bottom really going to fall out?
00:29:07.000 | I think a lot of people have a lot of significant fears
00:29:10.000 | that they think are really impactful
00:29:13.000 | but they're the only ones who see.
00:29:15.000 | Now, I've been a doomer in times past.
00:29:17.000 | I no longer am.
00:29:18.000 | But I've worked through a lot of those things
00:29:20.000 | and I realize they're just not the case.
00:29:23.000 | First, most of my audience is based in the United States.
00:29:28.000 | And Americans have a strong impulse
00:29:35.000 | to overestimate how shaky their position is.
00:29:38.000 | This happens in the government.
00:29:39.000 | This happens in individual citizens, etc.
00:29:43.000 | I myself have been a significant critic
00:29:47.000 | of the United States of America.
00:29:49.000 | But I'm here to tell you,
00:29:51.000 | it's not going to fall apart today.
00:29:53.000 | I promise.
00:29:54.000 | It's not going to fall apart today.
00:29:56.000 | I'll get to an answer in just a moment of,
00:29:58.000 | "Okay, what if it does fall apart?"
00:29:59.000 | Because I believe in planning in case it does fall apart.
00:30:02.000 | But it's not going to fall apart.
00:30:04.000 | This is not the end of America.
00:30:05.000 | Notice I said earlier hyperinflation around the world.
00:30:07.000 | There's hyperinflation all around the world right now.
00:30:10.000 | It's not just Venezuela.
00:30:11.000 | It's not just Russia.
00:30:13.000 | It's more normal places.
00:30:15.000 | Argentina, which has hyperinflation about every three months.
00:30:18.000 | Sorry, Argentinians.
00:30:20.000 | It's Turkey right now.
00:30:23.000 | There's just significant inflation all around the world,
00:30:26.000 | in many places.
00:30:28.000 | But these countries don't collapse.
00:30:32.000 | And what you see is you see everyone rush to safety.
00:30:36.000 | And where is the safest economy in the world right now?
00:30:39.000 | United States of America.
00:30:41.000 | Safest stock market in the world right now?
00:30:44.000 | American stock market.
00:30:46.000 | It is so huge and so vast
00:30:48.000 | and has so many of the great global brands available in it
00:30:52.000 | that while there can be interesting opportunities
00:30:55.000 | in other markets and other places,
00:30:57.000 | and while I think that there are many other markets
00:31:00.000 | that could provide...
00:31:07.000 | I'm trying to parse my words carefully.
00:31:10.000 | There are many other markets to provide a lot of things
00:31:13.000 | that the US market doesn't.
00:31:15.000 | At its core, the American stock market is still king.
00:31:18.000 | It's powerful. It's easy. It's wonderful.
00:31:21.000 | And the United States of America is powerful.
00:31:24.000 | It's so good.
00:31:25.000 | When you think about all the risks
00:31:27.000 | that face countries around the world,
00:31:29.000 | and having been a big proponent of internationalization myself,
00:31:32.000 | I've studied a lot,
00:31:33.000 | I often just come back and reflect
00:31:35.000 | on how good the United States of America is,
00:31:38.000 | especially when measured on a global metric,
00:31:41.000 | in terms of everything from fresh water, food supply,
00:31:47.000 | industrial opportunities, stability of government,
00:31:50.000 | stability of currency, powerful workforce,
00:31:53.000 | educated workforce, abundant workers available.
00:31:56.000 | It's just on so many metrics,
00:31:59.000 | it continues to be the leader in the world.
00:32:02.000 | And so while I think that significant challenges
00:32:05.000 | are coming in the coming decades,
00:32:08.000 | and I think there will continue to be
00:32:10.000 | wonderful international opportunities,
00:32:12.000 | don't freak out thinking that,
00:32:14.000 | "Oh, the United States of America is here."
00:32:16.000 | It's not.
00:32:17.000 | Rest and follow your strategy.
00:32:21.000 | At its core, I believe that most people
00:32:24.000 | should do exactly nothing
00:32:26.000 | during times of great fear
00:32:30.000 | and during times of great greed.
00:32:34.000 | If you avoid taking a big action
00:32:37.000 | during times of great fear and times of great greed,
00:32:41.000 | you will most likely make the right decision.
00:32:46.000 | If you think about your lifetime,
00:32:49.000 | and you think about how different things can be
00:32:52.000 | in a mere year from the event
00:32:54.000 | that you're most concerned about,
00:32:56.000 | or three years from the event
00:32:58.000 | that you're most concerned about,
00:32:59.000 | or five years from the event
00:33:00.000 | that you're most concerned about,
00:33:03.000 | it's probably going to be better
00:33:04.000 | three years, five years, ten years from now.
00:33:08.000 | Let's talk through a few.
00:33:10.000 | Today, of course, we have inflation fears.
00:33:13.000 | But let's go back a couple years,
00:33:15.000 | beginning of the pandemic.
00:33:17.000 | Markets down.
00:33:18.000 | Inflation fear is significant.
00:33:21.000 | We're printing extra trillions of dollars
00:33:24.000 | to pay money that we don't have
00:33:26.000 | in the United States.
00:33:27.000 | Global situation.
00:33:29.000 | Just think how different things are today,
00:33:31.000 | two years later.
00:33:33.000 | Most of those fears,
00:33:35.000 | a few realized in a very small measure.
00:33:39.000 | Most of those things, dead and gone.
00:33:41.000 | Pandemic, it was bad, deadly.
00:33:44.000 | Not as bad as we feared at that time.
00:33:47.000 | Markets corrected quickly.
00:33:48.000 | Went on to have a major increase
00:33:52.000 | in market values.
00:33:54.000 | Go back to 2008, 2009,
00:33:58.000 | within working memory of most of us.
00:34:01.000 | Major fears.
00:34:02.000 | And yet, what followed?
00:34:05.000 | Incredible times of profitability.
00:34:07.000 | Incredible times of growth.
00:34:09.000 | In real estate, stocks, so many things.
00:34:12.000 | And so, while I want to be slow to say
00:34:16.000 | that stuff always goes up,
00:34:19.000 | because that's not necessarily the case.
00:34:21.000 | If you bet on stuff going up,
00:34:23.000 | and on things getting better in the future
00:34:25.000 | versus things getting worse,
00:34:27.000 | in most cases,
00:34:30.000 | history has proven you to be right.
00:34:34.000 | So, what do you do?
00:34:35.000 | What can you do?
00:34:37.000 | First thing that you can do
00:34:39.000 | is you can practice good personal financial planning.
00:34:43.000 | We have a tendency to overlook
00:34:45.000 | the importance of the basics.
00:34:49.000 | For example, when I was a financial advisor,
00:34:53.000 | I would tell people,
00:34:54.000 | "Don't invest money in the stock market
00:34:56.000 | that you think you might need in the next five years."
00:35:00.000 | You've heard that so much, it sounds trite.
00:35:03.000 | It sounds stale.
00:35:04.000 | It doesn't sound like good advice.
00:35:05.000 | It sounds like old advice.
00:35:08.000 | And yet, there's a tremendous amount of wisdom in it.
00:35:12.000 | If today, you have money in the stock market
00:35:16.000 | that you need for an expense that is important to you,
00:35:21.000 | that you're planning to spend six months from now,
00:35:25.000 | there's a good chance
00:35:26.000 | that you're not very comfortable right now.
00:35:30.000 | But, in hindsight,
00:35:32.000 | the time to take that money out of the stock market
00:35:34.000 | would have been, say, four and a half years ago,
00:35:38.000 | or three and a half years ago,
00:35:39.000 | or two and a half years ago, etc.
00:35:41.000 | Because as that expense is approaching,
00:35:44.000 | you become more susceptible to market volatility.
00:35:48.000 | And there was any number of opportunities
00:35:50.000 | where you could have sold and taken the money and gone
00:35:53.000 | and prepared for that expense.
00:35:56.000 | So, I think that this is a good reason for you today
00:36:00.000 | to sell something, even when prices are down.
00:36:03.000 | If in your personal financial planning,
00:36:05.000 | you have an expense coming up that you need money for,
00:36:09.000 | then that is an appropriate reason for you
00:36:11.000 | to sell your investments and set the money aside.
00:36:18.000 | Not to say it's without risk.
00:36:19.000 | You might be selling when things are down.
00:36:21.000 | They could be higher in the future.
00:36:23.000 | You have to judge for yourself.
00:36:26.000 | But, if you have an expense coming up
00:36:28.000 | that you need money for,
00:36:29.000 | you know the date and time of it,
00:36:31.000 | then that's a good reason for you to sell investments.
00:36:36.000 | Good personal financial planning is how you answer that.
00:36:41.000 | You have savings, and you plan ahead for expenses,
00:36:44.000 | selling investments when you need to,
00:36:46.000 | to cover those expenses.
00:36:48.000 | We teach this most and most effectively
00:36:52.000 | when we talk about retirement planning.
00:36:53.000 | Making sure that you always have money set aside
00:36:56.000 | to cover your retirement expenses.
00:36:58.000 | But it applies at every stage along the way.
00:37:03.000 | What other rules of personal financial planning
00:37:07.000 | can be followed?
00:37:08.000 | Well, this is why we focus so much
00:37:10.000 | on conservative cash flow needs.
00:37:13.000 | If you don't need a ton of money
00:37:15.000 | to cover your personal expenses,
00:37:18.000 | then you can be more flexible with selling investments.
00:37:26.000 | Generally speaking, stocks have a higher return
00:37:35.000 | than the cost of things like mortgage debt.
00:37:40.000 | So, it's crazy to ever sell stocks
00:37:44.000 | or invest less money in stocks
00:37:49.000 | so that you can pay off your mortgage faster,
00:37:52.000 | from a general financial perspective.
00:37:55.000 | And yet, lots of sophisticated, smart,
00:37:58.000 | wealthy people make that decision.
00:38:01.000 | Why?
00:38:03.000 | The answer is, there's a real value
00:38:06.000 | in minimizing uncertainty.
00:38:09.000 | And there are times in life
00:38:10.000 | in which you happily take a lower return
00:38:14.000 | in order to maximize certainty
00:38:16.000 | and maximize flexibility, maximize freedom.
00:38:22.000 | So, in your personal financial planning,
00:38:24.000 | keeping your personal outlay low
00:38:26.000 | can allow you to respond to market conditions
00:38:29.000 | very effectively.
00:38:31.000 | You can say, "Hey, I believe in the value of my assets
00:38:33.000 | long term, but I don't want to get in a situation
00:38:36.000 | where I have to sell my investments quickly."
00:38:41.000 | So, good personal financial planning
00:38:43.000 | seeks to maximize your personal safety
00:38:46.000 | and to maximize your flexibility,
00:38:49.000 | because those are things that you can control
00:38:52.000 | while you're not able to control the fluctuations
00:38:55.000 | and the random wanderings around of markets
00:38:57.000 | that reflect the opinions of millions and millions
00:38:59.000 | of other people.
00:39:03.000 | A good reason to sell investments
00:39:08.000 | when they're declining in value
00:39:09.000 | is that you need the money
00:39:11.000 | to cover some personal expense.
00:39:14.000 | That's a good reason.
00:39:16.000 | Another good reason to sell investments
00:39:19.000 | when they're declining in value
00:39:21.000 | is if you have an alternative investment
00:39:23.000 | that you really believe is better or better for you.
00:39:30.000 | See, what I'm trying to do here is simply
00:39:32.000 | articulate a few reasons why I think you should sell investments
00:39:36.000 | so that you don't think that guys like me
00:39:39.000 | are just always saying, "Ah, don't sell stocks."
00:39:43.000 | You can sell your stocks if you have a trading strategy
00:39:45.000 | that involves your selling stocks.
00:39:48.000 | You can sell your stocks and feel good about it
00:39:50.000 | when they're down,
00:39:51.000 | if you have to cover a personal expense.
00:39:54.000 | And you can also sell stocks when they're down
00:39:56.000 | and feel good about it
00:39:58.000 | if you have an alternative investment
00:40:01.000 | that is really exciting and that you think will beat
00:40:03.000 | what you're currently invested in.
00:40:06.000 | It's a fallacy to think,
00:40:08.000 | "Hey, I bought a good investment.
00:40:09.000 | It's just always going to go up."
00:40:11.000 | From time to time, you may have bought a good investment,
00:40:14.000 | but then you may come across another better investment
00:40:17.000 | that you want to invest money into
00:40:18.000 | that you think is going to be better for you.
00:40:20.000 | And at that point in time, that's a good reason for you
00:40:24.000 | to sell the first investment
00:40:27.000 | and move on to the second one.
00:40:29.000 | You don't have to think about this
00:40:30.000 | like some kind of emotional thing.
00:40:32.000 | If you genuinely have a better investment
00:40:34.000 | that you are excited about,
00:40:36.000 | then go ahead and pursue it.
00:40:37.000 | Go ahead and move into it.
00:40:42.000 | Some of the best times to make those transitions
00:40:45.000 | from an okay investment to a better investment
00:40:48.000 | come when things are falling apart.
00:40:51.000 | So be open to that.
00:40:52.000 | Be aware of that.
00:40:55.000 | Beyond that, it's hard for me to think of a good reason
00:40:58.000 | to sell a high-quality investment
00:41:02.000 | during a time of market decline.
00:41:06.000 | Market decline is a good time for you to work,
00:41:10.000 | to make as much as you can
00:41:13.000 | to buy high-quality investments when they are on sale.
00:41:20.000 | I'm so concerned that this just sounds trite.
00:41:23.000 | Okay, Joshua, we know that.
00:41:24.000 | I get it, but that's it.
00:41:28.000 | If I think of most scenarios that people would propose,
00:41:32.000 | I think that those two reasons,
00:41:34.000 | especially with the comment on trading strategies,
00:41:36.000 | that, hey, if you've got a trading strategy
00:41:39.000 | that you created before the decline, follow it.
00:41:41.000 | Great. Go for it.
00:41:42.000 | Lots of people have strategies that say,
00:41:44.000 | "I'm never just going to sit tight while my stocks go down."
00:41:48.000 | Sure, go for it. That's fine.
00:41:50.000 | Just make sure you decided that before this happened
00:41:53.000 | or before this is happening.
00:41:55.000 | Otherwise, your reasons for doing it
00:41:57.000 | are going to come down to, number one, I need the money,
00:42:01.000 | and number two, I've got a better investment.
00:42:03.000 | See, that's the problem, right?
00:42:04.000 | You've always got to know what you're going to invest in.
00:42:06.000 | Are you just going to sell your investment and sit in cash?
00:42:09.000 | I think today, actually this time around,
00:42:11.000 | with inflation concerns,
00:42:12.000 | people are much more open to the danger of just doing that.
00:42:16.000 | It's not usually the danger of inflation
00:42:18.000 | that causes the problems with that strategy.
00:42:20.000 | Usually, it's the danger of just sitting on it
00:42:22.000 | and not getting in before it all goes up.
00:42:24.000 | It happens to so many people.
00:42:26.000 | We sell out, then we sit and we sit and we sit,
00:42:28.000 | and we say, "All the reasons I sold are all the reasons
00:42:30.000 | that I'm still out of the market,"
00:42:32.000 | but you just sit and sit and sit,
00:42:33.000 | and, hey, it never goes up.
00:42:35.000 | Sorry, it goes up before we get back in.
00:42:40.000 | But, so cash is not a great thing to have.
00:42:44.000 | It's better to have an asset,
00:42:45.000 | and if you tell me, "Joshua, right now,
00:42:47.000 | you could have a million dollars of cash
00:42:49.000 | or a million dollars of stock.
00:42:50.000 | Unless I've got a great alternative investment
00:42:53.000 | that I can quickly turn the cash into stock,
00:42:55.000 | I want to own the stock,"
00:42:56.000 | or into whatever the other investment is.
00:42:58.000 | It can be anything.
00:42:59.000 | "I want to own the stock.
00:43:00.000 | I want to own something that's an actual investment,
00:43:02.000 | especially during times of turbulence,
00:43:06.000 | unless I need the money for a personal expense."
00:43:10.000 | So that's it.
00:43:11.000 | So, in conclusion, if you are concerned right now
00:43:13.000 | about the market decline, fine, great.
00:43:16.000 | So ask yourself, "What's my strategy?"
00:43:18.000 | For 20% of people, you already have a trading strategy.
00:43:21.000 | Go, follow it.
00:43:22.000 | For most of us, it's just buy and hold.
00:43:24.000 | Buy good quality assets and hold them forever.
00:43:26.000 | That's it. Simple as that.
00:43:28.000 | So ask yourself, "Is this a good quality asset?"
00:43:31.000 | If it is, then keep it.
00:43:33.000 | You don't have to sell it.
00:43:34.000 | You don't sell your house just because
00:43:36.000 | the market value goes down 15%.
00:43:39.000 | You don't freak out and do that.
00:43:40.000 | So just keep your good quality assets.
00:43:43.000 | Look at your personal financial planning,
00:43:45.000 | and then say, "Hey, you know what?
00:43:47.000 | I got this personal financial needs over here to take care of."
00:43:51.000 | And then, if you have a better investment,
00:43:53.000 | consider selling for that to buy the better investment.
00:43:56.000 | But at its core, those are the only reasons
00:43:58.000 | you should ever sell an investment.
00:44:00.000 | It should not be due to a most likely temporary decline
00:44:04.000 | in a stock market index
00:44:07.000 | or whatever thing you're currently following.
00:44:11.000 | There are black swan events that can occur.
00:44:20.000 | Those black swan events are probably best solved
00:44:25.000 | with good personal financial planning
00:44:27.000 | and with good preparedness planning.
00:44:30.000 | This is why I'm an advocate of good financial planning
00:44:33.000 | and why I'm an advocate of good prepping.
00:44:36.000 | Why do I have a course called internationalescapeplan.com?
00:44:39.000 | Well, because there are things that could happen in a country
00:44:42.000 | that are genuinely so catastrophic
00:44:44.000 | that you're better off to go out.
00:44:46.000 | But you aren't any better if you sold your investments
00:44:49.000 | and you have all the cash in that country
00:44:50.000 | if you've got to get out.
00:44:51.000 | So you put in place an international escape plan.
00:44:54.000 | There's things that can happen to food supplies,
00:44:56.000 | but you're not going to sell your 401(k) to buy food.
00:44:58.000 | You just need to have a little bit of extra food
00:45:00.000 | so you can get through a temporary famine.
00:45:03.000 | Things that can happen that can wipe out your local area.
00:45:05.000 | A storm can come through.
00:45:06.000 | A tornado can wipe you out.
00:45:07.000 | So you need to make sure you have good homeowners insurance.
00:45:10.000 | You could get hit in a car accident today and be injured,
00:45:13.000 | so you make sure you have good disability income insurance.
00:45:15.000 | You could have a heart attack and die,
00:45:16.000 | so you make sure you have good life insurance.
00:45:19.000 | So a good combination of financial planning and prepping
00:45:22.000 | solves for most of those big worst-case scenarios,
00:45:25.000 | not selling your stocks.
00:45:27.000 | That's a separate conversation.
00:45:30.000 | If you have a better investment for your stocks, go for it.
00:45:32.000 | If that means a different country that has better demographics
00:45:35.000 | or better finances, go for it.
00:45:37.000 | But at its core, don't freak out just because markets decline
00:45:41.000 | and then go and sell.
00:45:42.000 | You will regret it.
00:45:44.000 | Buy high-quality assets and keep them,
00:45:46.000 | or follow your trading strategy.
00:45:49.000 | That's it.
00:45:50.000 | Hope this is helpful, useful.
00:45:51.000 | Internationalescapeplan.com.
00:45:52.000 | Internationalescapeplan.com.
00:45:54.000 | I'll be back with you very soon.