Stock Market Crash of 2020 – My Recession Plan

Will There Be A Stock Market Crash in 2020? Here is my investing plan for the recession

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Will there be a recession in 2020? The stock market is at it’s all time high. CNBC just published an article on their theory of what is pushing stocks so high, and it turns out it’s not institutional investors like mutual funds and index funds. Instead, it’s hedge funds playing catch up to this bull market. That's not a confidence inspiring sign.

I've been a dividend investor since 2014, saving my money, investing (using brokerages like Robinhood, WeBull, M1 Finance, and Vanguard). Over the last 5 years, with some luck, minimalism, and money management skills, I've managed to save and invest over six figures and $7,000 of passive income.

A lot of beginner investors ask me if they should wait for the stock market crash / economic recession, or start investing and buying stocks today. What is the right answer?

In order to understand the answer to that question, we have to understand why everyone is afraid of a financial meltdown in the first place.

Indicator #1 something called the inverse yield curve. What it means is when long term investments yield lower interest rates than short term investments. There is an increased risk in investments that are longer term, which doesn’t make any sense. If you’re going to invest and lock your money away for many years at a time, you want it to have a higher yield than a lower one.

When we’re talking about the inverted yield curve, it looks at bonds to see their yields or “interest rates”, and if short term bonds provide higher interest rates than long term bonds, then we get the inverse yield curve. When this happens, it is often times seen as an indicator for an upcoming recession and investors believe that interest rates will fall.

Historically, we have seen this in the past and it’s been a reliable indicator of showing us the last 7 recessions successfully. This happened in the 80s, during the Dotcom bubble bust around 2000, and it preceded the 2008 recession as well.

Indicator #2 – The ISM Index. This is a big one, this is is called the Purchasing Manager’s Index. This index looks at the economy’s manufacturing sector month to month. Specifically it looks at orders, employment rates, production, supply chains, and inventories in the manufacturing space which is a big sign of the health of the economy.

A PMI Index of more than 50 means that this important part of the economy is expanding and growing. A score of 50 means no change from last month, and below 50 means the economy is contracting and slowing down. As of right now, the PMI Index is 52.4, with forecasts for that number to be increasing. This means investors can probably expect to be bullish on the stock market in reaction to the higher profits when this index is above 50.

Indicator #3 – Warren Buffet indicator. You may have read somewhere that Warren Buffet has an excessively large cash position of close to $130 billion dollars. Does this mean Warren Buffet is preparing for the worst economic crash in US history? I don't believe so, and the video addresses why that is.

Indicator #4 Ray Dahlio. A very smart billionaire made an insurance bet of 1% of his hedge fund – the equivalent of 1.5 billion dollars indicating the market will move lower.

With all these indicators, what is going to happen to the economy and what is your plan?

7 Ways To Invest $10,000 In 2020

Lets discuss 7 ways you can invest $10,000 in 2020 – and how you can best maximize your money, enjoy! Add me on Instagram: GPStephan

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FIRST: Use some of that money towards an Emergency Fund
This the money you set aside to ONLY be used in case of…YOU GUESSED IT…. an emergency, where you have no other option to turn. Ideally, the size of this fund should equal anywhere from 3-6 months worth of your expenses, and kept easily accessible….for emergencies. Lets say you lose a job, your car breaks down, or some other “emergency” happens and you need money…this is where you get it from.

SECOND: Pay down high interest rate debt
When you have high interest rate debt…paying DOWN that debt is like getting a guaranteed return on your money at whatever interest rate you’re paying down. So paying off a 20% interest credit card balance is like getting an immediate, guaranteed 20% return on your money – without ANY risk whatsoever.

THIRD: Retirement accounts
-Roth IRA
This is a retirement account where you can contribute and invest after-tax money, and then all of the profit within that account is COMPLETELY tax free after the age of 59.5. You’re able to open up one of these accounts and deposit up to $6000 PER YEAR if you’re under the age of 50…and if you’re over 50, you can contribute $7000 per year.
-Traditional 401K
This is an account that you invest PRE-TAX money into, and then you’re taxed when you begin withdrawing the money after the age of 59.5. Now, unfortunately, the “catch” here is that you end up paying taxes when you take the money OUT of the account in retirement…so it’s not exactly a “Tax free” investment.
-HSA Health Savings Account
This account is specifically used to pay any out of pocket medical expenses or charges that you incur…if you don’t use them one year, that’s fine, it all rolls over to the next year.

FOURTH: Low Risk Low Reward: High Interest Savings Account, CD, Bonds
First, a savings account is the most obvious choice – and there’s no shortage of high interest, online savings accounts that’ll pay you above 1.7% annually.

Second, if you KNOW for sure you won’t be needing the money for a specific amount of time – you could look into putting your money into a CD, which will give you a slightly higher return while you continue saving.
And third…if you want to take a little more risk with your money, but still keep it fairly safe…we have Bonds.
A bond is basically just an IOU from a government, state, city, business…and again, most bonds are relatively safe.

FIFTH: Index Funds
An index fund is basically just an investment that tracks the overall market, and you’ll get to own a small amount of everything in one fund, for a low price. For MOST people watching this video…I’d probably recommend this route, because it’ll be your best risk vs reward in terms of how much money you’ll be making.

SIXTH: Individual Stocks
This is, by far – the riskiest from everything I’ve discussed – but, the payout potential could be much larger. This is because you’re placing a significant portion of your money within only a few specific companies, and your entire investment is dependent on those businesses doing well…so if you have a knack for picking stocks, and NOT trading emotionally…then it may work out for you.

SEVENTH: Real Estate
You could potentially buy a property up to $100,000 or so, and then rent it out. That could make you money in so many different ways, not to mention the tax benefits you’ll get of being able to write off all of your expenses, the equity you’ll gain by paying down the mortgage, and the potential appreciation of the building over time. All of which could increase your overall return dramatically.

*Not Financial Advice 😉

For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at [email protected]