The 2020 Recession: How To Prepare For The Next Market Crash

It seems like every day you hear people
talking about the upcoming recession well it is uncertain when exactly the
next recession will happen there is no doubt that one is coming therefore in
this video I will share with you exactly how you should invest to protect
yourself from a recession and if you’re new to the channel then hit the
subscribe button below for more life-changing content before we get into
the exact investment strategy that will have you in a better financial position
than 99% of others when the recession finally happens let’s first go over some
things you can do outside of investing to ensure you are prepared for hard
times in the economy similar to stock investing where you are maximizing your
gains limiting your risk the best thing you can do to prepare for an economic
downturn is to reduce the financial risks that are present in your life so
how do we do that in my opinion there are three tenets of financial risk
mitigation that must be in place before you can face the recession with the
first being a reduction in your debt in the United States debt is a serious
issue credit card debt alone totals more than one trillion dollars and when you
add in student and mortgage debt to that number
it only multiplies in fact the average credit card debt per US household as of
June 2019 was eight thousand three hundred and ninety eight dollars which
means that getting debt under control is something most Americans should be doing
now the reasons why you will want to have reduced debt during times of
economic turmoil are plentiful first if you have dead and lose your draw because
of the recession then paying debt or interest payments will be that much
harder and will only further increase your debt load moreover having debt
hanging over your head will add to the financial stress you will bear as you
start to see your investments decline that is unless you use the investment
strategy I will share later on in this video the second way you can protect
yourself heading into a recession is to make sure you are covered with the right
insurance things like your house car and your life should definitely be insured
heading into a recession as during these hard times you may find yourself without
the funds to replace them if an accident were to happen some recommended coverage
levels include the full replacement cost of your house and 75% of the content
within it $500,000 worth of car insurance for liability and bodily
injury and ten times your annual salary in
life insurance hovering proper coverage will give you the peace of mind that if
something happens you won’t be on the hook for the replacement cost of these
assets or that your family will be taken care of finally before heading into a
recession you must have an emergency fund set up well this type of financial
backup should be in place whether or not a recession is looming it’s imperative
that you have ample funds put away when times are tough sadly most Americans
have failed in the emergency funds department in fact roughly 40% of
Americans couldn’t come up with $400 cash that they needed to respond to an
unexpected emergency in their life now you’re probably asking yourself how much
money should I be putting away in this emergency fund general advice is to have
three six months of living expenses put aside but in my experience having a
year’s worth of money ready to access neaby will give you the confidence that
you could ride out just about any financial challenge you face don’t
forget that this emergency fund must include all living expenses like rent
and car payments groceries and utilities now that you’ve set up a solid financial
base we can now move into how to invest during a recession when preparing your
recession-proof investment strategy there are certain considerations to take
into account the first is your investment horizon or how long you
expect to keep your money in the market if you’re young then more likely than
not your portfolio will be able to recover from any losses that may
experience during the lowest points to the recession for these types of
investors there really isn’t any need to change your current investment strategy
unless you have your money in companies that may be put out of business if the
economy crashes unfortunately not everyone can be this lotsa days achill
in the recession investment strategy in fact the majority of investors need to
change their approach when tough times are ahead for instance there are many
people that just cannot handle the emotions of seeing their investments
drop by 30 or 40 percent other investors may be retiring in the next few years
and are relying on their current portfolio value to sustain them through
their later years in short each investor has different needs but surviving an
economic recession can be achieved by anyone by investing in the right types
of funds so what funds should you be investing in the following five types of
investments will be sure to help fight the market decline best during times of
recession fun number one health care stocks
whether the economy is booming or busting people’s health will always be a
top priority which is why holding stocks incredible health care funds is
recommended as part of your recession investment plan think about it like this
someone who needs to take blood pressure medication isn’t going to stop taking a
pill that keeps them alive just because their stock dipped 20% which means that
putting your money in companies that offer these products is a safe bet to
add to this fact many people have medical coverage through their work
meaning that buying these medical products and supplies isn’t even coming
out of their pockets so spending on drugs and supplies is unlikely to be
discontinued a good example of just how solid health care companies can be in
times of economic turmoil is Johnson & Johnson during the 2008 recession
companies were seeing all-time lows in their valuations with many of them
dropping more than 50 percent in value but this medical device company due to
its positioning in the healthcare field experienced only a 7% drop in share
price and kept paying out dividends even in these hard financial times
therefore healthcare stocks should be part of your recession proofing strategy
fund number 2 utility stocks similar to health care products whether the economy
is doing well or not people need to keep the lights on in their homes
this means that companies supplying this core service will continue to earn
steady income and experience less of a hit from the market decline in fact when
asked to choose between losing their electricity and missing a medical bill
payment most people felt that giving up their power was a much dire consequence
making utility stocks probably a safer investment than health care funds
another reason to hold utility stocks during a recession is that many of the
best utility stocks pay dividends for instance Duke Energy Corp is an annual
dividend of 4 percent and its dividend yields continues to grow year-over-year
dividend yielding stocks are important to have during a recession because the
income they can provide will offset any declines in price that they experience
and can supplement your cash position if money becomes tight fund number 3 high
dividend stocks let’s face it not every stock is going to experience significant
price increases over time and they certainly won’t during a recession which
is why a lot of the value of a stock clients and its
dividend yield if you’re unfamiliar with what a dividend is it is commonly
defined as a sum of money paid regularly by a company to a chair holders out of
its profits in short it’s a company rewarding you for being a shareholder
and receiving dividends is important during a recession it can be easy to get
discouraged with your investment portfolio when your fund values decline
but seeing a consistent dividend coming in on a quarterly or annual basis helps
ease the pain again as I previously mentioned utility stocks as well as real
estate investment trusts are great options when looking to recession-proof
your investment strategy just be careful when looking into high dividend yielding
companies oftentimes companies will try and lure in investments because they
offer a larger than normal dividend yields but their financial position is
less than stellar making them a prime target for financial turmoil especially
when the markets begin to decline fund number four investment properties moving
away from the stock market rental properties make for excellent
investments during a recession now as we saw in 2008 and other recessionary
periods house values are not amenable to price drops but with that being said a
lot of aspects of this type of investment make it almost totally
recession proof first people will always need a place to live so whether the
markets are soaring or bottoming out if you’re a landlord then chances are high
that you will still have a tenant willing to pay you rent
every single month even during the recession and these rent payments are
another fantastic element of owning rental property for instance if your
salary plateaus or you lose your job you will still have a secondary stream of
income to help pay the bills while you try and get back on your feet finally
owning rental properties is beneficial beyond just recessionary periods based
on historical studies worldwide Houston returns from the year 1870 to 2015 were
six point nine percent after inflation meaning that this form of investment
will continue to make you money year after year fun number five government
bonds another strong investment option for tough economic times are government
bonds while the market may struggle the government is never going to collapse
nor will it default on its debt meeting that your investment is in a very safe
position US Treasury bonds are the most popular form of government bond and this
is due to a few reasons first the United States economy is very
durable meaning that it will always bounce back from the financial
challenges it faces moreover historically in times recession
global capital tends to find its way into companies and government related
investment vehicles making the US dollar rise in value and in turn local
investments another benefit is stocking up on bonds in preparation for a
recession is how interest rates react to times of low financial performance
typically in a recession interest rates decline as the government tries to spark
the economy by allowing people to borrow at cheaper rates as interest rates drop
so do bond yields and this causes the value your bonds to go up so while
everyone is watching their portfolios crush you’ll be sitting pretty with your
wise investment in government bonds now the previous five types of funds are
great ways to recession-proof your investments and investing in them we’ll
have you ahead of 99% of the population when the recession takes place but there
was one other option to consider which is to get out of the market completely
when a recession is looming many people feel most comfortable by selling off
their investments in holding a portfolio value in cash for the uneducated
investor this would seem like a way to avoid any form a portfolio to climb but
the seasoned investor knows that this isn’t the case you see holding your
money in a savings account or other low yielding accounts means that you are
making no money but beyond making no money you were absolutely losing money
due to inflation as of June 2019 inflation in the United States was 1.7
percent this means that if you had $100,000 sitting in your bank after a
year your buying power with this money would now be 98 thousand three hundred
dollars well it sucks to be losing money this way how investors should see it is
that they are controlling their loss rather than risking losing tens of
percentage points instead when the market slides into a depressed state
therefore by reducing the financial risks in your life assessing your risk
tolerance for a recession investing and putting your money into the funds I have
previously mentioned you will be ready to face any economic challenges that are
coming your way thanks for watching if you want to go from the life you have to
the life you deserve then hit the subscribe button below

13 Replies to “The 2020 Recession: How To Prepare For The Next Market Crash

  1. my portfolio is recession proof since i use ray dalios portfolio method and warren buffets advice on choosing recession proof companies now am stock pilling cash to invest since things will be discounted my finances are inn order now i wait buy when people are selling sell when people are buying

  2. Great animation again. One thing I'd add is that we keep very close track of our net worth and exposures across asset classes, and in preparation have taken down our equity exposure from 30%+ to less than 5%. Being less exposed mitigates some of the risk. You pointed this out, but I think particularly in times of economic downturn its very important to have more than the standard recommended Emergency Fund (3-6 months)… You just want to be cash heavy so you can take care of any worst case scenarios (I.e., if we were to lose any tenants in rental properties.)

  3. 2021-2022 will be when the next recession hits. It is usually 4-5 years after a tac cut. Reagan cut taxes in 86', recession in 91'. Clinton cut taxes in 97', mini recession is 01'. Bush cut taxes in 03', recession in 08'.

  4. I am not sure but after watching your video, im more prepared thank you. I was also wondering what do you use to animate your videos?

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