05:26

So, now I want to talk about the perspectives that I do understand and do know a little bit better. I still do not know everything by any means, but I certainly understand the economic and financial implications, and overall investing in business implications of this a lot better than I do the public health side of things.

So now, as investors, what can we do about all this? The bad news is that we can’t control how the stock market reacts nor how the economy is impacted by millions of people being out of work, and businesses being closed across the world. But the good news is that we can control how we react, and we can control how we manage our money.

06:07

As all of this started happening, the first thing I looked at was my personal finances, not investing. If you don’t have your personal finances in order before you start investing, you’re going to have a hard time being a successful investor. It’s like trying to come up with a spectacular roof design, first, before you’ve built a solid foundation and a supporting structure. If you try to invest first, you may have to act in ways that make it difficult to be successful in investing. I talk about this concept a lot on the podcast. So if you’ve been listening to the show for a while, you’ve probably heard me talk about it. But I really do believe that getting your personal finances in order is extremely important before you even consider investing. Of course, investing is important. I think investing early is very important because the longer you can let money compound for you, the better off you’re going to be, but I think it’s also important to make sure that you have your personal finances in order.

A lot of my friends and family know that I’m very passionate about investing both in the stock market and real estate. So, when all this started to happen, my phone started blowing up with texts and calls, asking what they should buy. I received numerous messages asking what they could buy to make a quick buck. I told every single one of them that, if they were looking to make a quick buck, they should go to their local casino and put it all on black or red, whatever their favorite color is, because their odds were probably better there. I know that might seem like a little bit of an exaggeration, in terms of the odds, and it may be, but you get my point. You can’t just buy stocks randomly hoping they will go up making a quick buck. That is not investing. That is speculating. I certainly do not give these types of recommendations to people when they ask, and I recommend that you don’t try to trade the stock market that way either.

08:00

In tying this back to the personal finance piece I was just talking about, if you try to speculate in the market like that before you have your personal finances in order, you may need that money that you’ve put into the market at a bad time. Say, you lose your job or you need to come up with the money for a loan payment or something along those lines, and then you have to sell your position that has gone down in value, causing you to lose money. Whereas, if you could have just held that for the long term and not speculated, you could have made money rather than selling at the bottom. And buying high, selling low is the exact opposite of what we actually want to do.

When you speculate and don’t spend the time to understand what you’re buying, you won’t have the conviction to hold it if and when it goes down. You might think you will now, but you most likely won’t. The emotional part of investing is by far the hardest. If you’ve put in the time to research and understand a company, and develop a real thesis as to why you’re buying it, or even just understand the ETF that you’re buying, and understand the companies that it owns, you’ll be able to hold that security through downturns much easier because you’ll actually understand what’s going on.

That’s one of the reasons why I don’t take stock picks from anyone. I don’t follow stock picks from Warren Buffett, Mohnish Pabrai, Guy Spier, even Preston and Stig, some of my favorite investors in the world. I don’t just follow them blindly into their picks. Even though they’re some of the best investors in the world, if I don’t understand their thesis as to why they’re buying that company, their holding period, when they might sell, and what might cause them to sell, that investment doesn’t make sense for me. Because I won’t be able to hold it through ups and downs. I won’t be able to hold it through the volatility that the stock market has. I just won’t have the conviction for it. That’s why you can’t take stock picks from the best investors in the world. That’s why you can’t take stock pics from people on Facebook or Instagram or Twitter, and just blindly buy into them. I just put out a post about this on Instagram and in our Facebook group, and it got a lot of attraction. It got a lot of attention. The photo said, “Be careful who you take advice from.” The same goes for taking real estate advice, as well as stock picks.

10:16

Now, I do not know everything. Truthfully, in the grand scheme of things, I barely know anything. I’ll be the first one to admit that. There are certain subjects or topics I know pretty well, and I’m happy to talk about those, but when it comes to things I don’t know, well, I do not talk about them. I really don’t know anything about the science or health implications behind the coronavirus, so I’m not going to talk about them. But I’m noticing that’s not the case for everyone. I want to remind people to be careful who they’re taking advice from, especially at this time.

It seems that with the recent volatility in the stock market, there’re stock market experts coming out everywhere. It’s the classic infamous stock tips from the mailman situation. For example, there are some people that I follow on Instagram that are very successful real estate investors. I follow them because they’re great real estate investors, and I want to learn everything I can from them. They have over 500 posts. They’ve never once posted about the stock market. They’ve never posted about anything outside of real estate. Then, I just saw one post the other day, saying, “Everybody should go all-in on Delta Airlines.” I was shocked. Maybe they’re an expert in the stock market. Maybe they know everything, but they’ve just never posted about it. That could be, but my guess is that they don’t and that they’re just getting brought into the hype.

I just want people to be careful, and to think about who you’re taking advice from. I love seeing people get interested in investing, but many of the posts, pieces of advice, and recommendations I’m seeing across social media are just a bit much. I’m not saying you need to listen to everything I say, and to take all of my advice. I’m actually not saying that at all. What I am saying is you should think about the person you’re getting advice from, and just weigh their advice accordingly.

12:06

Now, I want to talk about some of the different things you can do from a personal finance perspective, to prepare you for this situation as we’re going through it, and then also to prepare you as we get out of the situation and go beyond it. Later in the show, we’ll get into the investing content. But like I’ve said, the personal finance stuff is so important. The base is so important, so I think we need to start there.

I work a full-time corporate job. Just like most other people, there’s a good chance I could be laid off if the economy enters a recession, and the business I work for struggles. The first thing I did was look at my emergency fund. I wanted to make sure that I had at 3-6 months of expenses saved in a liquid account that I could access if needed; that’s not invested in an individual brokerage account; that’s not invested in an IRA; that’s not invested anywhere; that’s just cash in a high-yield savings account. Now, I realize that’s nothing groundbreaking or new. It’s actually very common advice that’s given in the personal finance space.

13:09

But something else I do that’s a little different is that, from the time I first got the loans that I have to today, I pay my loans as far in advance as the companies will let me. Most of the banks that hold my loans only allow three months to be paid in advance. So that’s what I try to do. My mortgage is paid in advance. The relatively small car loan I have is paid ahead by three months. And my student loans are paid ahead, as well.

I try to do this when I first get the loan, then I continue to make the normal monthly payments over time so that the buffer remains intact. If you start out with 2 or 3 months ahead, every time that payment is due again, if you just continue the monthly payment, that 2-3-month buffer that you built up by paying ahead at the beginning will just remain there for the rest of the loan, and you’ll continue to stay ahead.

So now, if something happens in the economy and I would lose my job, I have my loans paid in advance by at least 2 or 3 months; in some cases, more and in some cases a little less, depending on what the bank will allow. I have at least 3-6 months of savings in an emergency fund. So when you combine those things together, you really are looking at closer to 6-9 months, maybe 6-12 months, of expenses that you have set aside, ready to go in case of an emergency, a layoff, or something along those lines.

14:32

When it comes to investing, everyone’s situation is different. So not everything I talk about throughout this episode will be applicable to you. But the personal finance strategies that I just talked about are things that I do, personally, and would recommend them for almost everyone. Of course, there are going to be some people or some situations that are not going to be applicable. But the personal finance strategies that I just talked about, where you have money set aside for future expenses in the event you lose your job, I think that’s applicable to nearly everyone.

I know it might sound a bit overwhelming at first, especially if you have a decent amount of recurring monthly bills or loan payments. If I were told that I had to save nine months of my current expenses when I first started, I don’t think I would have the confidence to be able to do it.

I certainly understand that it can be overwhelming at first, but it doesn’t have to be. You don’t have to do it all at once. Start by first calculating how much you spend on a monthly basis. Make sure you have a clear understanding of that. Then save one month of that amount in a savings account; then two months; then three months; and so on. Once you have the emergency fund, you can then start working towards paying your loans in advance, if you so choose to follow that strategy. You don’t have to save these amounts in a lump sum. You don’t have to wait until you can put that all aside at once. You can put $50/week or $50-$100/month aside. Whatever you can afford, you can put those aside in an account. As long as you continue to do that consistently, it will add up.

16:08

This goes back to a point that’s very popular in one of my favorite books. It’s called Profit First by Mike Michalowicz. We’re actually having him on the show in a few weeks, so be sure to check out that episode. In that book, he talks about setting aside just a very small percentage of a company’s profits. He talks about how it doesn’t seem like much, but if you do those small percentages over time, it builds a habit. You’ll be surprised as to how quickly those small percentages add up and continue to grow. And before you know it, you’ll have your emergency fund. You’ll have one month saved, then you’ll have two months saved, then you’ll have three months saved, then you’ll have confidence. You can do it, and you’ll eventually get to six months, and maybe you’ll take it even further. Maybe we’ll get to 9 months or 12 months, and then you’ll start paying your loans in advance, as well.

Once you’ve done those personal finance things, you can then start investing from a place of financial strength, and with a strong foundation. That allows you to truly invest, and invest for the long term. Not speculate.

17:08

Just to clarify, when I talk about investing in this context, I’m talking about outside of an employer-sponsored 401(k). If you’re investing in a 401(k) through your employer, I’d almost always recommend that you invest in it at least up to the employer’s match. That’s free money that you should almost never pass on. That return is nearly 100% immediately, and you can’t get that type of return with any investment. Whether it be real estate, stocks, or Bitcoin, it just really doesn’t get better than 100% guaranteed returns. When you’re considering investing, I think a 401(k) with an employer’s match, at least up to that percentage, is a given. You can and should start that even before you have your emergency fund. I would start that right away. But when it comes to investing in IRAs and taxable investment accounts, such as an individual brokerage account, I’d be sure to have your personal finances in order first, like we’ve been talking about so far throughout the show.

18:08

You can probably guess that I’m not going to be giving individual stock picks in this episode. I’m not going to say everyone listening should go buy Apple stock or Starbucks stock or any stock for that matter. But there are quite a few different things I’d like to talk about related to the stock market.

As of this recording, the market is down by about 30%-35%, whether you’re looking at the S&P 500 or the Dow Jones. Some individual companies that are well known, like Carnival, Spirit Airlines, and some other well-known travel or hospitality type companies, are down by nearly 80%. This is all within just a month or so, so it’s been a very quick decline.

I know a lot of investors that piled in after a 10% decline. It seemed logical at the time because we haven’t seen that type of pullback, quickly, in quite a while. It goes back to December of 2018 when we last saw something like that. I even bought some stocks when the market declined by that much. But what I think investors need to keep in mind is that the market can always go lower. Always. Not during this crash, but in the past, I’ve bought in stocks that seemed cheap because I thought that they just couldn’t go any lower. I looked at the price. I looked at the valuation, I said, “There’s no way that these can go lower.” But let me tell you, they can and they will.

19:30

As we deal with this crash, consider investing slowly over time. Now could be a good time to dump all your money in and buy stocks. But remember, they can always go lower. So, consider not investing all of your cash at once. You and I will never be able to time the bottom. Neither can anyone else, so don’t feel bad. Personally, I’m just adding slowly to my favorite stocks and ETFs over the next few weeks. That way, if things do drop more, I’ll still have some cash to buy things when they’re lower too.

20:03

Now, why is the stock market even crashing at all? There are a lot of reasons why stocks have been falling and why they could continue to fall. The most popular one right now is because of the Coronavirus, COVID-19. But there are also very real issues in the oil and gas industry, as well as with fiat currency, and global bond markets. As Preston Pysh, host of We Study Billionaires and co-founder of The Investor’s Podcast Network, wrote on Twitter, “We are witnessing two major once-in-a-lifetime events, simultaneously. One, a global pandemic; and two, the meltdown of a fiat currency.” And subsequently, the global bond markets.

For those who may not know what a fiat currency is, it’s a fancy word and it sounds complicated, but all it means is that the currency is not pegged to anything. It’s not pegged to gold or anything else. It’s just a currency not backed by anything.

21:01

Now, I’ll admit I’m not that great with macro. I need to spend more time studying it and learn it better. But because I don’t know it well, I’ve been reading everything I can from experts who know the material better than I do, like Raoul Pal from Real Vision, Ray Dalio from Bridgewater Associates, and Preston from We Study Billionaires. There are many, many more. That was just to name a few. I know enough about macro to understand what these guys are talking about a little bit. I understand that it’s not good and that there could be more trouble on the horizon. All of that’s not even really considering the impacts we’re going to feel in the US and across the globe; from businesses, schools, universities, and other major organizations shutting down entirely. It’s going to lag a little bit. We won’t see the impact of it for a month or two, maybe a little bit quicker, maybe a little bit longer. But it certainly isn’t going to be good.

21:57

Data that recently came out shows that we have over 3 million unemployment claims in a very short period of time. There’s a chart. I’ll link to it in the show notes. You guys can go check it out, or you can follow me on Twitter. I posted it there as well. It shows the unemployment claims number where we are today compared to other previous recessions and other financial meltdowns. At the time, the rest of those look big. If you look back to 2007-2008, it looked big. But when you compare that to today, it’s barely a little blip on the graph. That puts into perspective just how massive the unemployment claims have been.

Of course, that’s something that we’re not going to see right away. It’s going to have a lagging impact. In a few months, everything will start to snowball and start to catch up. When people are missing loan payments, businesses aren’t open, and businesses are starting to report quarterly results, we’ll see just how bad this has around summertime

22:57

For all of those reasons I just talked about, I think the markets could potentially go lower. Those are why I said I’m buying slowly on the way down. We’re down about 30%-35%, so far, but during the last broad market crash, we were down closer to 50%. When you start to think about individual stocks, some of them went down even more. So, I think we could fall a lot lower.

That said, I have not sold anything. I’m a long-term buy-and-hold investor. I’m in my mid-20s. So I still have at least 20-40 years before I need any of the money that I’m investing in. I definitely am not going to need it in the next year or two, so I’m not worried about it. I’m not selling any of my positions unless the businesses have materially changed because of this pandemic and are not going to survive in the future. But that’s not the case for any of my positions, so I haven’t sold anything, and I’m just continuing to add. And like Stig says, I’m continuing to add to my compounders.

24:01

As I wrap up this part of the episode about my general thoughts of the stock market right now, I want to read you two of my favorite quotes that I think are very applicable right now. The first one is from Warren Buffett. And it goes like this: “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying wash-tubs, not teaspoons. And that we will do.”

24:31

Take a second and think about that quote. We’ve experienced one of the best bull markets in the history of the United States over the last 10 years. This goes back to what I was talking about from the personal finance perspective. You need to have savings set aside. You need to have a big wash-tub of cash ready to deploy into the market, not just a little bit of play money that you’ve set aside. Not teaspoons, as Buffett would call it. You need to be ready and prepared for these types of events as they come. I read that quote in one of Buffett’s annual letters. I’ll link to all of his annual letters in the show notes so you guys can go check those out. Ever since I’ve read that quote, that has been one of my favorites.

25:24

The second one is from Mike Tyson. It’s not from a successful investor like Buffett, but it’s short, simple, and to the point. “Everyone has a plan until they get punched in the mouth.” Think about that. How does that relate to the stock market situation we’re dealing with now? How does that deal with the economic implications that we’re going through now? Everything seemed good as the market was continuing to climb. Last year, I think the mark was up almost 30%. Everybody has a plan when things are going that well, but what do you do when you get punched in the mouth? Remember that stocks can always go lower. Invest in stocks or ETFs you know and understand, and be ready to hold for the long term.

26:08

Now, I just want to take a minute and talk about real estate, and then I’m going to dive into questions from the audience. I’m going to answer a ton of the questions that I’ve been getting on Instagram and in our Facebook group.

I have two podcasts. One is called Millennial Investing, which we’re on right now, and the second one is called Real Estate Investing. Since I have that second podcast dedicated to all things real estate, I’m not going to spend a lot of time here talking about real estate. But I wanted to at least mention it because I know a lot of people are interested in it.

It varies from area to area, but across the US, cities, and states are starting to put in provisions that say landlords cannot evict tenants for lack of payment. There are talks that mortgage payments may be postponed, as well, which could help the landlords. But if that doesn’t happen and the ability to take action on lack of payment stands, landlords could be on the hook for their mortgage without any rent to cover it. This goes back to the same principle we talked about at the beginning of the show in relation to personal finances, especially having an emergency fund. In the context of real estate, it’s known as reserves, and they’re very important to have.

27:21

Since I have a full-time job and I earn a salary, I decided to not take $1 of cash flow from my rentals, and leave it all in the business as reserves indefinitely. In a few cases, it’s helped with some small rehabs and some small repairs that we had to do, but it’s also going to help in a time like this if I can’t collect rent. In my normal times, reserves also help with covering vacancies. Someday, I’ll take whatever’s left of the money out. But for now, I’m going to continue to build the reserves. If there’s enough to buy another property, I’ll use it for that, making sure to leave enough reserves in then, too. You might not be able to, or willing to, not take the cash flow out of your rentals, which is completely understandable. But the point is that it’s very important to at least have cash reserves.

Just before this episode, I was looking at our bank account for the rentals. When I say “our”, I mean that I invest almost exclusively in real estate with my business partner, Ryan. I looked at our bank account. We have at least nine months of reserves to cover our mortgages in case we can’t collect any rent from our tenants. And we have our mortgage paid out by two months. Going back to that principle that I talked about before where I pay the loans, I have in my personal name ahead by a few months, whatever the bank allows, I do the same with my rentals. When we first bought it, we paid it ahead by two months. So I have that two-month buffer, as well as the nine months of reserves.

So now, this situation could get a lot worse than it is and we’ll still be able to hang on to our properties, which is the important part. You need to be able to be so well-capitalized so that you can hold these properties because that’s where you really start to get hurt. It’s not so much the lack of cash flow. Of course, you want to have cash flow consistently over the long term. A small period of time where you lose your cash flow because of economic events like this is not going to kill you. But if you have to lose that property, if you have to sell the property at a loss, or you can’t hold it for the long term, that’s really going to hurt you. You might not be willing to not take cash flow out of your rentals. That’s completely understandable. But the point is that, even if you’re going to take cash flow out of it, it’s very important to make sure you have enough cash reserves, both for yourself, personally, as well as for your real estate businesses.

29:44

Now, for the last part of this episode, I’m going to answer some of the most popular questions I’ve been receiving on Instagram and in our Facebook group over the last couple of weeks. I’ve been getting a lot of DMs on Instagram and on Twitter, and then there’s been a lot of activity in our Facebook group. A lot of people have been joining the conversation and joining the community, putting out their thoughts, and posting in the group. If you’re interested in connecting with other like-minded individuals, and you’re looking to join the community of all the other people listening to the show, feel free to join our Facebook group. I’m very active there. I’m really enjoying the conversations, and I love connecting with you all. Definitely, come check that out.

30:21

The most popular question I’ve been getting is which stocks do I buy? I will give you some stocks that I hold in my portfolio, but I’m not going to give you any stock picks that you should run out to buy. My telling you what I own is a way to teach you. Hopefully, you’ll learn how I think about stocks, how I think about the current market, and how I build my portfolio. I do not want you guys to go out there and buy everything that I own nor buy it just because I own it.

30:55

This goes back to what I was saying at the beginning of the episode where, if you don’t understand the business, if you haven’t done the due diligence, if you haven’t done the research, if you don’t have the conviction as to why you’re investing in that company, you’re not going to hold it. Just like I said, I don’t buy things just because Warren Buffett nor any of my other favorite investors are on it. You guys shouldn’t do it for me either. I just want to make sure I put that disclaimer out there because I don’t want you guys making any decisions based solely on what I’m buying. But I do think it’s a good opportunity for you all to learn and understand the types of companies I’m looking at, and how I’m positioning my portfolio.

We also have an episode coming out soon with Simon Erickson, where we talk a lot more about why you shouldn’t buy stocks just based on other people who own them. We talked about how investing is very personal, so be sure to check out that episode for a deeper conversation about that as well.

31:44

But for my portfolio, about 20% of it is in an ETF (VOO) which is Vanguard’s S&P 500 Index Fund. That’s mostly held in my employer-sponsored 401(k) account, but every single week, I’m contributing to that account and it’s going right into the S&P 500 Index Fund. My next largest position is about 15% of my portfolio, Vanguard Information Technology ETF (VGT). It’s super low cost, and it covers a lot of your most-popular tech companies. Again, similar to the S&P 500 Index Fund, I own most of this through my employer-sponsored 401(k) account, and I’m contributing to it every week with every paycheck, just continuing to dollar cost average into it. Between the S&P 500 ETF and the Vanguard Information Technology ETF, I have about 35% of my portfolio in those two funds combined.

Now, my next largest position is Mastercard (MA). I have about 13% of my portfolio in MasterCard. I also have about 13% of my portfolio in cash. I had closer to 35-40% of my portfolio in cash before this crash happened, but as things have continued to fall, as I said throughout the episode, I’ve been starting to deploy some of that cash. And so, that cash position is down from about 35-40% to about 13% of my portfolio. My next largest position is about 10% of my portfolio, and that is Visa (V). 

To round out the top 10 of my portfolio, I have Markel (MKL) at about 5%. I have Square (SQ) at about 5%, MercadoLibre (MELI) at about 3%, and I also have Adobe (ADBE) at about 3% of my portfolio. And then I have some other holdings that are all less than 1% of my portfolio. Those are PayPal (PYPL), Berkshire Hathaway (BRK.A), Yext (YEXT), Datadog (DDOG), Apple (AAPL), Brookfield Asset Management (BAM), Trade Desk (TTD), Zoom (ZM), Microsoft (MSFT), and even a small position in Bitcoin.

Bitcoin is less than 1% of my portfolio, so I do not have a large allocation to it. But if you listen to my episodes with Preston Pysh, the two-part episodes, you’ll hear exactly why I’m a little bit bullish on Bitcoin now. I didn’t understand it for the longest time, but after I met with Preston, and after he’s been able to mentor me a little bit on Bitcoin, I decided to allocate a very small percentage of my portfolio to it so I, at least, have some exposure.

I hope that was beneficial for you guys. I hope the insight into my personal portfolio is helpful. I hope it’s educational for you. I hope it gives you some ideas as to how I’m constructing my portfolio. I just want to remind you, I just really want to drive the point home. Make sure you do not go out and buy any of those stocks strictly because I mentioned them nor because I own them. That is not the right way to invest. If you do that, you are speculating and not investing. I just want to make sure that’s very clear. But I did want to illustrate how I’m constructing my portfolio in a time of crisis like this.

35:05

Now, the next question that I’ve been getting a lot is: “Should I buy cruise companies, airlines, Boeing, and things of that nature? Things that have been really depressed?” Of course, I cannot give specific investment advice. I can’t tell anybody whether you should buy cruise companies, whether you should buy airlines, Boeing, or anything like that. What I can say is that for me, personally, I’m staying away from those companies. The reason for this is the opportunity cost. This is one of the biggest things that I’ve learned in becoming an investor over the years.

When I first started buying stocks, I didn’t really give much thought to the other stocks that I could buy. I thought that if a stock was good on my discounted cash flow analysis, then I should buy it, and my portfolio would do well. What I quickly realized was that you’re not investing in a vacuum. You’re investing with thousands of other companies to choose from. Maybe the company you buy turns out to be a great investment. Maybe you get a 10% annualized rate of return. That would be fantastic. But is that 10% return great if you could have gotten 15% with another company that you were considering? Of course, you’re not going to know that that other company is going to return 15%, otherwise, you would buy it. But that’s the thought process that I go through now. 

Anytime that I’m going to buy a company, I think, “Is there a better place for my money? Are there other companies in my portfolio that I can add to that I think will provide me a better return? Are there other companies that I’m analyzing that I think would have a better upside? should I potentially invest that money in those instead of this company?” And so when I think about cruise companies, airlines, Boeing, those types of things, they might turn out to be fantastic investments; they could go on to beat the S&P 500. They could go on to be the best investments over the next decade. I don’t know. I don’t think anybody else knows either.

But personally, I weigh those against some of my favorite holdings. I weigh those against MasterCard, Visa, Square, and Markel. When I think about the money I have to deploy, would I rather own Carnival, a cruise company? Maybe Boeing or some of the airlines? Or would I rather own MasterCard or Visa or Square? Personally, I think that’s a very easy answer.

37:14

The next question I’ve been getting a lot is, “Should I be buying individual stocks or ETFs?” Again, for everyone, it’s going to be different. Investing is very personal, so I can’t say whether you should buy all individual stocks or ETFs. But if you listen back to what I just mentioned about how I’ve constructed my portfolio, you can see that I have a large percentage of my portfolio, 35%, in ETFs. That’s going to continue to grow because I’m contributing to those every single week, while I’m not buying all the other stocks every single week. So, that percentage is going to continue to grow. That’s what I’m comfortable with.

So, you need to think about what are you most comfortable with from a diversification perspective? What are you okay with from a volatility perspective? Really, what helps you sleep at night? I’ve also learned that that’s a big component of investing. It’s not always about maximizing your returns. Of course, we all want to make as much money as possible. But if you’re not able to sleep well at night, then that investment might not be worth it. If you’re not going to get a good night’s sleep because you own all individual stocks, or if you’re not going to sleep well because you own a lot of ETFs and you think you’re leaving a lot of money on the table, then adjust your portfolio accordingly, and do what’s best for you. Spend time studying individual stocks. Spend time studying ETFs. And then decide what’s best for you.

In a couple of weeks, we’re going to have JL Collins on the show, and he is a huge proponent of just buying Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), which is very low cost. He recommends just buying that, never selling it, continuing to buy it anytime you have cash, holding it forever, and never doing anything different. So, holding 100% of your portfolio in ETFs.

We also had Rick Ferry on a few episodes ago, and he recommended the same thing. They expect, because of diversification and low costs, that those funds will actually outperform people who pick individual stocks.

And then you’ll have people who think individual stock investing is the best thing. We’ll have Simon Erickson here on the show. We’ve had a bunch of other individual stock pickers on the show. We’ve had Stig. We’ve had Tobias Carlisle. We’ve had a ton of great guests that think individual stock picking is the best. I personally love picking individual stocks as well.

You’ll probably notice that we present diverse opinions here on the show. The reason I do that is that I want you guys to get educated on both sides of the coin. I want you to understand the different options that are out there for you, and then think about it and make the best decision for you.

To talk more about sleeping well at night, I want to talk about Bitcoin. Back in about 2017, I bought 1 BTC. It was about $1,500 to $1,700, somewhere around that price. I held it for one day, and then I sold it. The reason I sold it was because I didn’t sleep very well that night. I literally felt sick because I owned that investment, and I didn’t know what I was owning. I didn’t know what I was risking my money on. I just had no conviction behind it. I didn’t understand it at all, so I sold it. Guess what it did over the next few weeks? If you follow Bitcoin at all, you probably know what happened. It shot up to $20,000, and I would have made over $18,000 off of one coin. That didn’t even bother me though, because I knew I was making the right decision for me.

40:29

I’ve been getting a lot of questions about Bitcoin. Full disclosure: I do own Bitcoin in my portfolio now. You’ve heard recently on the show when we had Preston, we talked about it in the two-part episode. If you want to learn more about Bitcoin, go listen to those two episodes. I cannot do it any justice here. Preston explains it extremely well. I’m not going to dive into it too deep here because I just truly wouldn’t do it any justice. Go back and listen to those two episodes. You’ll learn everything you need to know about Bitcoin from a beginner’s perspective because I didn’t know anything about Bitcoin before those episodes. So I was really learning and asking questions, just like the audience would.

41:06

I’ve also been getting asked if people should stop contributing to their 401(k)’s. This is a hard one to answer. If you need that money to survive, if you need to stop contributing that money to your 401(k) so you have money to buy food, pay rent, pay your mortgage, pay your car loan, and so on, then those are obviously circumstances you’re going to need to take into consideration. I can’t really speak about it because I don’t know your personal situation.

But what I can say is overall, in general, I would try my best to not stop contributing to your 401(k) as long as your company is still matching. If your company is having a hard time matching your contributions, because they’re going through hard times as well, then it might not be as big of a deal if you start to scale that back a little bit. But as long as they’re offering matches still, that is still free money I talked about at the beginning of the show. That’s free money with a guaranteed 100% return, so I definitely would try my best to not pass that up, again, unless you really need that money to survive, pay your rent, pay your bills.

42:11

The last question to wrap up the show is: “What don’t I know that I need to know?” I think this is a great question. And I think the simplest way for me to answer it is that stocks can always go lower. Whether it be individual stocks, ETFs, it doesn’t matter. Whatever you’re considering investing in, if you’re considering to invest in it just because it’s gone down a lot in value, without any other due diligence nor research, and you have no thesis behind it. Just remember that stocks can always go down. 

If you’re looking at Carnival Cruise Lines, and it’s down 80%, I don’t think that’s necessarily cheap or that it can’t fall any further. It can still continue to fall. It could fall 100% from that level. We’ve actually seen Carnival Cruise Lines (CCL) shoot back up over the last couple of days since it bottomed after dropping about 80%. A lot of people that purchased it then are starting to think that they’re great stock-pickers and that they could continue to do that. And maybe they are, but I just would caution you to really do your due diligence, and just always remember that stocks can go lower.

I just want to reiterate that I don’t know everything. I’ll never claim to know everything. I’m learning just like everyone listening to the show. That’s one of the things I love about investing. One of the things I love about business is that you’re always learning. It doesn’t matter how successful you are. If you’re Warren Buffett, Bill Gates; these guys are all learning machines. They’re continuing to learn. I think they’ll learn forever, and I’m in the same boat.

43:37

Everything I talk about on the show is my opinion. It’s about what I’m doing. Nothing is specific investment advice for you. I just wanted to give you guys some guidance as to how I’m handling the situation. I wanted to give some tips and points as to where I think I could provide value for you guys. Take this time to learn, learn, and learn some more. As I said, I’m a learning machine. Some of the best investors in the world are learning machines. Take this time to really get educated understand what you’re going to be investing in. Understand the concepts you need to become a successful investor. If you’re quarantined at home, rather than flipping on Netflix for a few hours and binge-watching TV shows, pick up some books; take some courses; use this time to be productive, and learn, learn, learn.

I hope you guys enjoyed this episode. I hope it provided you value. I hope it answered a lot of the questions you have and I hope it gave you some insight as to how I’m investing and how I’m handling the situation. If you’ve been listening to the show for a while and you haven’t left a rating and review in Apple podcasts yet, I’d greatly appreciate it if you took 30 seconds to give the show a five-star rating and review. It really helps the show grow, and I really appreciate it.

If you want to join the community and connect with other like-minded investors and other people from the audience, be sure to join our Facebook group. You can find it by just searching Millennial Investing on Facebook. And be sure to connect with me on Instagram. I’m very active there. I post almost every single day. I answer all of my DMs and comments. I’m happy to connect with you guys, and I’d love to learn about what you guys have going on. But that’s all I had for this week’s episode. I’ll see you guys again next week!

Outro  45:14

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