HOW TO INVEST IN 2019 #Best Education Page #Online Earning

So in this video today we're gonna be talking about

how to invest in 2019.

Now I've done a number of different videos on this topic

that kind of talked about how you need to set

yourself up for investing as far as

paying off any high interest debt and sending up

a cash cushion and all that jazz.

And so that's not what we're gonna talk about

in this video but if you are looking for that,

I do have a complete guide over on my blog,

investingsimple.blog, I'm gonna link up to down

in the description below and I'll also link you up

to a video I did that kinda talks about

those initial steps that you have to take

before you invest, but what we're gonna focus on this video

is more or less the psychology going into 2019,

what you need to understand going into 2019

as an investor.

And the very first thing I wanna talk about

is the drastic difference we saw between 2017

and the year 2018 in the stock market.

Now, as of recording this, it is December 31st

so we've just about closed out the year.

And this is pretty much what we've seen

over the last two years from the S&P 500.

So 2017 was a year of euphoria.

It was essentially a straight bull run

and for a lot of people this was the very first time

that they dipped their toes into the stock market,

and unfortunately it gave a lot of people

very unrealistic expectations when it comes to investing

and what they should be expecting out of the stock market.

The stock market is not simply something where you throw

your money into it and then automatically get a 10, 15,

20% return in one year.

That is not just realistic.

And unfortunately a lot of people have a clouded judgment

as far as what to expect from the market.

And so we saw this bull run that was largely a result

of corporate tax cuts,

and that resulted in record earnings.

And pretty much everyone was in this

massive state of bliss and euphoria.

And then pretty much as soon as 2018 rolled around,

January of 2018, the party was largely brought

to a halt here because of the beginnings

of the trade war.

So these are the things that we have seen happened in 2018

that have led to this insane volatility,

in some cases record-breaking volatility.

I mean we just came off of the worst ever Christmas Eve

in history followed by the best day the market

has ever seen.

So this is like volatility that nobody has ever seen before

and this is largely due to the fact that there are more

people than ever investing in the stock market.

I mean services like Robinhood, M1 Finance,

all these free brokers platforms have made it

so easy for people to invest.

So we're seeing record high participation

in the stock market.

And second of all we have high frequency trading platforms

in algorithmic trading and automatic sell points

and stop losses taking place,

and so as a result of all of that we are seeing

more and more volatility in the market

and more drastic price moves

than we have ever seen previously.

But these are some of the catalyst that we've seen here

behind this massive market volatility.

Number one we ar
e seeing this trade war

between the US and China that is largely unresolved.

It's pretty much just on hold to this point in time.

And we are also hearing about fears of slowing

economic growth over in China.

And based on the fact that the US market

is so dependent on China, it's going to affect both markets.

We are also in a rising interest rate environment.

We just had our fourth rate hike this year

and we are also seeing weaker numbers from companies

like Apple, for example.

Some of these companies that were absolutely

killing it in 2017 are a little bit more cautious

under forward looking guidance here at 2018.

And so this is pretty much the landscape right now.

And so why are we seeing all of these volatility

in the market?

It's because of one reason, and that is the fact that

the stock market, the market loves certainty.

2017 was a year of certainty.

It was company after company posting record-breaking

earnings, great economic conditions,

no fears of any kind of trade war

and then in 2018 it's nothing but uncertainty.

We have no idea what's going to happen with the trade war,

we have no idea what's going on with China.

We don't know what the Fed is doing here in terms

of interest rates, how far they're going to rise them,

and they seem to be caring more about the economy overall

as a whole as opposed to the effect of the interest rate

hikes on the stock market, which they should

because you wanna look at the whole economy.

You wanna look at the unemployment rates

and all these different factors when determining

whether or not it makes sense

to actually increase interest rates.

I think the last thing they really care about

is the effect on the stock market because that's just

one part of the overall or one indicator

of the overall economy.

And so what we have right now is massive uncertainty

in the market and is being expressed

in this rampant volatility that we are seeing.

And now before I get into strategy number one,

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But anyways let's get into number one and talk about

the first thing you have to do in 2019 as an investor

and that is to get comfortable with volatility.

There is nothing saying that this volatility is going

to stop in 2019 and if anything I see it possibly

getting worse because of the massive amount

of uncertainty out there.

And so if you're not comfortable with the volatility

you're experiencing within your stock portfolio

or within your investment portfolio,

you are probably too far on the right here

on the risk-reward profile.

And this is something I've actually never really

talked about on my channel, and it's a shame

that I haven't and so I'm glad I'm covering it now,

but this right here is what

a risk-reward profile looks like.

The top line here, the green here is the potential reward

or potential return from investment

and this red line here is your potential risk

or downside with that investment.

So a lot of people are looking

for high return in investments.

They're looking for 10, 15, 20% potential upside or more

so they end up all the way out here on the screen line,

but what they don't realize is that by putting themselves

out here on this risk-reward profile,

they're exposing themselves to all of these volatility

and all of these downside risk.

So if you found that you just started investing

in the stock market maybe somewhere in 2017

and maybe you invested in some growth stocks

or some speculative investments and you experience

this massive bull run and you were having a great time

but now all of the sudden you're not having

such a great time, you're having trouble sleeping at night,

it's probably because you are not investing

in something that is aligned

with your actual risk tolerance.

And this is the first time that the volatility

is showing within your investments.

So what you may want to do is push yourself

a little bit further back here on this profile,

so maybe you're looking to go for a less aggressive return

but you're also exposing yourself

to a lot less downside risk.

So just to explain this to you guys,

all the way on the left here where you have basically

no potential return but no risk,

that's gonna be cash, that's gonna be your bank investments

whether it's a CD, a money market, anything like that,

that right there is absolute certainty.

And if you want absolute certainty,

it comes at a price.

And that's price is the fact that you're not

even gonna keep up with inflation and you're going

to lose the buying power of your money,

or at best you're gonna just keep up with inflation

and have no growth of your money.

So that right there is the price for certainty.

A little bit further to the right of that we have bonds.

As conservative as you can go would be US Treasury Bonds

or Ultra Short term Bonds, that's gonna be a very small

amount of risk, very small potential return there.

And then just beyond the bonds,

you have your ETFs and your mutual funds.

This is people who are out there buying Vanguard ETFs,

buying index funds, or they're investing in mutual funds.

And rather than investing in individual stocks

they would rather own the broad market and have diversified

exposure to the stock market, that's gonna put you

maybe about there on that line.

A little bit further to the right now we're looking

at blue-chip stocks, blue-chip investments.

Look at the stocks on the Dow Jones, the Dow 30.

This is companies like DuPont, or Apple, or Microsoft,

or 3M, these massive well-established companies.

You're not gonna see as much volatility with them

because a lot of these are safe haven stocks.

They are well-established companies with a very long

track record but you are gonna still see some volatility

there because you're owning individual stocks.

Beyond that now you have growth in tech.

This is where a lot of people are involved.

I am pretty heavy in growth in tech and so I've exposed

myself to a massive amount of volatility here

but the difference being I don't really care about that.

I don't really care what my stocks were doing

in the short term.

In fact I don't really look at them.

And that's something we're gonna talk about

a little bit later is why you even feel you need to be

looking at your portfolio when it's down.

And these are the things that a lot of people end up doing.

They obsess over their portfolios,

they're checking it every two or three hours,

and it's like, what are you expecting to happen?

But anyways, that is where a lot of people are right now

is over here in the growth in tech

and even further over to the right when you have

massive upside and massive downside.

That is like cryptocurrency.

That is pot stocks.

That is where most people are right now.

They're either in growth in tech, or they're in crypto,

or pot stocks and they're exposing themselves

to massive amounts of volatility because they are so

far out on this risk-reward spectrum.

So the simple solution to this is if you're not

comfortable with the volatility you're experiencing

within your portfolio,

you gotta push yourself back that way.

If you're experiencing too much

and you're in growth in tech,

maybe look at buying some blue-chip stocks.

If the blue-chip stocks you're owning are too volatile

and you're not comfortable with it,

maybe you should become an ETF investor.

If even owning ETFs is stressing you out,

maybe you should go invest in bonds.

And if you just wanna be as conservative

and safe as possible, go put your money in the bank

and watch it do absolutely nothing.

But this is exactly what volatility is here.

I drew this on the side here.

This is basically that pendulum that is talked about

in the book "The Intelligent Investor" by Benjamin Graham.

If you guys have not read that book,

I'll link up down the description below

where you can grab a copy.

One of the best books on investing on stock market.

It's sitting behind us here on my bookshelf.

And this is one of these things

that Benjamin Graham talks about

is this pendulum here where the market is always

swinging between optimism and pessimism.

Well, during times of certainty, you're not gonna have

as drastic of a swing there between optimism and pessimism,

but once there's volatility in the market

you're gonna see more and more aggressive swinging

of that pendulum and that is why we are seeing

more explosive price movements now than ever before.

It largely comes down to the fact that there is so much

uncertainty within the market.

All right, strategy number two for investing

in 2019 is KISS.

I'm sure you guys know what this stands for,

keep it simple stupid.

So many people insist on investing in complicated shit

and I don't really know why this is.

It's just like something that seems intriguing

or interesting to you.

And what I'm going to say is that when you are seeing

elevated volatility in the market like we've seen in 2018

and like we are most likely going to see in 2019,

that is not the time to experiment.

Unless you have massive risk tolerance

and you're only investing what you are willing to lose,

I would personally avoid these categories.

Now, you can invest in whatever you want to.

If you wanna go out there and buy pot stocks,

in crypto and all that, it's completely okay.

You can do whatever you want to do,

I'm just telling you this is personally

what I am going to be doing in 2019.

And I'm not saying that speculation is necessarily wrong.

I mean I've speculated in the past as well

but this is just not the time in my opinion

to be speculating when you're seeing massive volatility

in the market unless you are some kind of short term trader

and you're profiting off of this volatility.

So these are the things that personally

I would avoid in 2019.

Number one, IPO investing.

Not a fan of IPO investing to begin with.

I always like to see a company have six months

of activity, of trading activity before I would ever

consider investing just because there was absolutely

no price history.

And as we've seen with companies like Snapchat and GoPro,

IPOs can go completely terrible.

So I don't like to invest in IPOs,

I've never bought an IPO, I don't plan on doing it in 2019,

and I don't think it's a great idea either to do this.

Number two, pot stocks.

Unless you really wanna speculate here,

I would not be investing in pot stocks or crypto currency

in 2019 just because of the amount of volatility

unless you're throwing money in there and saying,

you know what, if I make money on this, great,

but I could lose it all.

The other thing would be small cap or micro cap stocks.

Any kind of penny stocks.

I mean I wouldn't invest in penny stocks regardless,

no matter what the market is doing.

But even talking about small cap stocks,

anything under a billion dollars in market cap.

Personally, I would be avoiding that right now

just because these are not companies that are time-tested.

These are not companies that are likely profitable.

And if we are going to be seeing a shift here

in the overall economy, which again there's no indication

we're going to be seeing that, we're just seeing a shift

here in the stock market.

But if we do see slowing economic growth

and we do eventually see a recession take place

which this is not what we've seen so far.

What we're seeing here is a correction.

Again, I know I'm throwing a lot at you guys at once here

but there's a big difference between a stock market crash

and a stock market correction.

And what we're seeing right now is simply a stock market

correction that has really little to do

with the overall economy.

But if you do see the economy begin to tank,

you don't really wanna be in these areas.

You don't wanna be investing in these small cap stocks

that are not turning a profit because they are typically

heavily leveraged with debt,

and it's just not good to have a lot of debt

in a tanking economy.

And then as far as this goes, speculation as well.

If you're already stressed out about the volatility

within your portfolio,

this would not be the year for speculation.

But again if you're just throwing a couple of box

in cryptocurrencies or pot stocks and you understand

that you're all the way out here on that risk-reward profile

and you're comfortable with that, not a problem with that.

But most people, I just think these are not areas

you want to be investing in for 2019.

Now, on the other hand, what might you want to look at

for 2019, number one, utility stocks.

Very safe investment, very consistent investment

simply due to the fact that they are a very boring

and consistent investment.

Every single month people pay their utility bills

and they pay their gas bills otherwise

you get your power shut off.

That used to be on my old job.

I used to work for National Grid, my power utility,

and that was my job.

I'd go door-to-door and shut people's power off

when they weren't paying their bills.

But as long as you pay your bill on time,

everything stays fine and your lights stay on,

and you still have gas for your stove.

But most people end up paying their electrical bill.

This is a very consistent area for investors.

Number two, blue-chip stocks.

Like we said, these are companies that are well-established.

Some of them are decades, if not over a century old,

and they've been through it all.

So if you are uncertain about the stock market right now

and you still wanna own individual stocks,

maybe take a look at the Dow Jones and look for

some blue-chip stocks.

Beyond that, look for companies with a low debt load

and a low price to earnings ratio.

I would be avoiding the Netflixes and the Nvidia

and the Amazons right now just because

of that high PE ratio.

And we really have no idea where the bottom is

with these stocks.

Unless you're looking at like a five to 10-year time horizon

on these investments and you're not worried about

what happens in the short term.

Beyond that, consumer staples is a pretty safe area

for investors in times of uncertainty.

These are your everyday household essentials.

Think Proctor & Gamble for example.

Healthcare, again, that is a pretty consistent

industry to be investing in.

That might be a good area to look at as well.

And also index funds and bonds.

This is the first time in a long time that bonds

have actually being paying a yield

that's been attracted to investors due to the fact

that we are in a rising interest rate environment.

And so if you're not comfortable with the volatility

that you're seeing with the stock market,

maybe what you should do is be investing

some of your money into bonds instead of putting

more money into the stock market because at the end

of the day you have to do something with your money,

with your idle cash.

If it sits there in the bank,

it's being deteriorated by inflation.

And so pretty much you gotta look at stocks,

bonds, real estate, something to do with your money

to grow your money.

And if you're not liking what's happening

within the stock market,

maybe consider other investments entirely.

But that is what I would do, I would keep it simple.

I would say 2019 is not the year

for any complicated investments.

Okay, and point number three is don't shoot yourself

in the foot.

So many people have already made this mistake.

I can't tell you how many comments I've seen on YouTube

that I'm just like, I have no words for these people.

For example, a lot of people know I'm invested

in general electric stock and a lot of people know

that I am massively under water on that stock

based on the fact that I started buying it

at prices that were way too high.

But I'm still holding on to that investment

and I believe in that company in the long run.

Now, recently on one of the videos I did,

somebody commented and they were like, you know what,

I've been holding general electric stock

for the last two years, finally decided to sell it.

And I'm like, there could not be a worst time to sell GE

unless we were back in 2008,

the last time that the stock was this low.

Why somebody would sell a stock when it's at a decade low?

The lowest price has been in the last 10 years

is absolutely beyond me.

And if you're somebody who is prone to making mistakes

like this, you probably should not be investing

in individual stocks because you do not understand

the simple concept of how money is made in the stock market.

And I'm seeing comment after comment like this of people

saying Apple is doomed.

You're an idiot for investing in Apple or Facebook,

you're an idiot for investing in Facebook.

And it's like, take a look at the bigger picture.

Take a look at what's going on around you.

Are people still going to be using Netflix in 2019?

Are we still gonna order our shit on Amazon in 2019?

Are we still gonna be going on Facebook

or Instagram in 2019?

I'm pretty sure the answer to all

of these questions is a yes, but people seem to separate

the stock from the actual company and look at it

as two different things.

And you can't do that.

As a shareholder, you own a piece of actual business.

And Facebook and Amazon and Netflix,

all these companies, Apple, are still absolutely killing it

in the long run.

These companies are gonna do amazing things.

They're gonna continue to see explosive growth.

All we're seeing on a short term is a slight difference

in what people are willing to pay for them

and everybody seems to think the sky is falling.

And it's just absolute insanity to me why people

would ever consider selling stocks like Apple

or Facebook or Amazon or GE at prices like this.

It's just crazy to me.

And so that's what I'm talking about right here

is don't be one of these people that's gonna shoot

yourself in the foot.

And if you already shot yourself in the foot,

stay out of the stock market.

Maybe get invested in some index funds or bonds.

The stock market might just not be for you.

But a couple other points on this I put together

a really good blog article if you guys are uncertain

about the stock market crash versus stock market correction.

It's an article called what to do before, during,

and after a stock market crash.

I will link it up in the description below.

It's kind of a good guide on preparing yourself

mentally and also what you can do to prepare

if you are concerned about a stock market crash

on the horizon, which, just so you guys know,

I am not concerned about that.

I am believing what we're gonna be seeing is a correction

and that's about it at this point in time.

I wanna remind you guys now how money is made

in the stock market.

How does Warren Buffet make money in the stock market?

And it's by buying during a bear market

and selling during a bull market.

Now, the Nasdaq just rolled over into a bear market.

I'm not saying that you need to run out there

and start throwing handfuls of cash into the market.

I would not do that, but it might be a good time

to start dollar cost averaging into some positions here

of companies that you've been waiting for

to find attractive prices.

But just remember in the stock market what is right

often feels wrong.

It feels wrong to be putting money into the market

when it's tanking but that is where people make the money.

That is when you make money in the stock market

is buying during a bear and selling during a bull.

The other thing I wanna tell you guys is focus

on a five to 10-year time horizon.

Where do you think Amazon is gonna be in five to 10 years

or JD.com, or Apple, or Facebook, or Microsoft, or Netflix?

Where are these companies going?

What is the overall trend that we are seeing here

with eCommerce or consumption of media.

Think about the overall long term trend

not necessarily all of this short term noise

that we are seeing within the market,

and that should help you potentially weather the storm.

The other thing I wanna remind you guys is it's not

a loss until you sell.

Not a loss until you sell.

A lot of people are out there saying,

I've lost a massive amount of money in the stock market

and it's probably not true because if you didn't sell

your investments, you haven't lost a dime.

Once you sell, once you officially pull out

that pistol and shoot yourself in the foot,

now you have lost that money.

But until you do that, you have not lost.

The other thing you may wanna consider,

and this is exactly what I am doing,

is dollar cost averaging into the market

and stocks that you're looking to own

begin by taking that small initial position.

So let's say for example you want to acquire

100 shares of Apple or I would think about

maybe buying 10 or 20 shares at a rip

over the course of six to 12 months or more

just because if that stock, if that share price

continues to fall, you're accumulating shares

at a lower and lower price lowering your cost basis.

I would not be funneling massive amounts of money

into the market just yet.

I would be patient and I would not be trying to focus

on buying at the bottom either.

It's impossible to time the market.

That's something we talked about in this blog article

I'm pointing you guys towards.

I would just accumulate shares of companies

that you would like and I would do this over a period

of maybe six to 12 months or maybe even longer.

And then the final point I wanna leave you guys with

is don't even look at your portfolio.

Why are you looking at your portfolio

if it's going to be making you feel

stressed out and anxious?

I understand where people are coming from with this

but I just wanna tell you guys flat out

I have not opened my portfolio in the last six weeks

because there's no point.

I know what's in there.

I know that I believe in these companies long term.

Beyond that, I don't really care what's happening

in the short term.

And I know a lot of friends of mine that invest

in the stock market are like looking at their portfolios

every hour, every two hours,

and it's like, what is the point?

What are you expecting to see?

I mean why are you stressing yourself out

by saying, oh my gosh, I'm down 20, 30, 40%

on these stocks.

If you are stressed out about this, again,

you're too far over here on that risk of our profile.

You gotta push yourself back over.

And so always leave that option out there available

to yourself as, don't even look at your portfolio

if it's gonna stress you out.

Give it a couple of months.

Give it a year and then see where you're at

because you're gonna remember the stock market

is a long term investment.

I believe Buffett says, anything investing

with the time horizon of less than five years

is just pure speculation so if you're investing

in stocks and you're hoping to make money in the short term,

it's probably not gonna be for you.

This is probably not the way for you to grow your money.

And if you have a five to 10-year outlook

on your investments, why would you need to be looking

at them every single day?

Just food for thought there for you guys.

But anyways, thank you so much for watching this video.

I've dealing with like some kind of upper respiratory thing

for the last week so I apologize that my voice

was kinda off, but I wanted to put this video

together for you guys and just kinda shed some light

on the psychology of investing in 2019.

So thank you guys so much for watching

and I hope to see you in the next video.

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