5 Ideas to Invest Your Money Today

Hey, what's up everyone, and welcome to the School of Personal Finance. So I've been having many conversations recently about what to do with your money now. How should we be investing in this current environment? We have inflation at pretty much 40-year highs. We have the Fed talking about raising rates like seven times throughout this year. Mortgage rates are going up. Real estate prices are still at all-time highs. The stock market has been very volatile, but it's not too far off of all-time highs. So what should we be doing with our money in this current environment? In this video, I'm gonna try to put a framework around it, give you my thoughts and ideas, and hopefully you find it helpful. All right, let's get to it. All right, so real quick, head over to schoolofpersonalfinance.com, get on my mailing list, check out the Power Sessions where you can work with me one-on-one. We can look at your overall financial picture using Right Capital financial planning software, and definitely check out the Education Center where the whole goal is to help you become great with money. So I'm gonna have courses in there. I'm gonna have accountability meetings, webinars, everything to teach you all that you should be doing to become great with your personal finances. So go check all that stuff out. All right, so as we all know, we've been in an economic boom cycle for like a decade now with the stock market, real estate, everything at record highs, record rates of returns. The last few years have just been amazing. And the pandemic, it seemed to accelerate all that with the money printing, the stimulus, everything just going up and up. But now it seems like the tide is turning, and we have a Federal Reserve who's talking about raising interest rates like seven times this year, monetary tightening. We have inflation at 40-year highs. Now we have a lot of worries ahead of us. We have everything that's going on in Russia. People are scared, and they're not really sure what they should be doing with their money right now. So what I'm gonna do is I'm gonna walk you through five different thoughts or ideas of things that you can be looking to do with your money right now. But my full disclosure is obviously none of this is financial advice for you. I don't know anything about you. These are just my general thoughts and ideas, and it's really just for educational purposes only. Another thing that I wanted to say was that for 2022, I think an important thing is for all of us to just take a deep breath and take a step back and maybe even lower our expectations that we might go into a much slower cycle, and we might not continue to see the rates of returns that we've had in the past. But again, nobody knows. So anything that I say to you, it is just a guess. Nobody knows what is going to happen. So we might very well just continue marching forward and making new highs in the stock market, the real estate market, and everything could just go on the way that it is going. But the herd doesn't feel that way. But again, the herd can definitely be wrong and has been many times in the past. So I feel like a big theme for 2022, at least for me personally and for people that I am advising, is to be patient and also be defensive. There's no need to rush in to making any huge moves right now. I would rather sit back and wait and see how things play out a little bit and how the stock market does, what the Fed decides to do, where the interest rates go. So I would kind of be patient and just realize that you don't have to make any tremendous moves right now as we go through this period of transition and uncertainty. So the first thing that I think is a good idea to do with your money right now is to strengthen your overall financial position. So this means like looking at your assets, your liabilities, your balance sheet, seeing who you owe money to. What are your liabilities? So like, do you have any variable rate debt? Do you have any credit card debt? Then that is definitely a place you should be putting your money right now. Do you have home equity lines of credit that are based on the prime rate? If the Federal Reserve raised rates, even if it's only five or six times this year, then the interest costs on your home equity line of credit, it is gonna go up one and a half to 2% this year. So it's a good idea to pay that thing down so that you're not exposed to those higher interest rates. So any variable interest that you owe right now, this is a good time to start paying that down. And then on the flip side of the balance sheet, for cash, it's a good time to be building up cash reserves, to have that stable foundation, right? So whatever you typically have as an emergency fund, I think that now is a good idea to increase that amount and to hold some more cash, just so you're on stable footing. If anything happens with the economy, you'll be prepared. If there is a big drop in stock prices or real estate prices, that you have some dry powder that you could deploy, you could take advantage of those lower prices. So building cash, having a little bit more cash than normal, I think is a good idea right now. And if you watch my content, you know that I rarely ever say that. I really don't like holding cash. But in this environment, I'm holding more cash than I typically do. And I think that it might be a good way to go. I'd rather be safe than be sorry and be overexposed if we really do have a decline in asset prices. But overall for 2022, I am preaching be on solid financial footing, right? No margin, no borrowing money to invest. I wouldn't do any of that this year. I would play more of a wait and see game and not get too crazy with any of my speculating with investments. I wanna be in a very solid financial position for 2022. And that means paying off debt and increasing my cash positions. Number two is I think that you still need to take advantage of all tax favored types of accounts. So this is a great year to max out your 401k to do it throughout the year, right? It's dollar cost averaging or your 403b plan or 457 plan. I also think if you qualify for maxing out your IRAs, either a Roth IRA or a traditional IRA, you should continue doing that. Spread your contributions throughout the year, throughout a 12 month period. I think that's a great way to go. Health savings accounts, another great way to go. Spread the contributions throughout the year. This way you're taking advantage. If we do have dips in the market, if you're just adding to these things every month, just like you always should, it's just a great way to invest for the longterm. So I wouldn't change anything when it comes to your retirement plan, your retirement accounts. Keep on adding, try to max all of them out. Take full advantage of the tax benefits you get from doing all of those types of accounts. Another thought would be if you have children, 529 plans. For the longterm, I think it's a great idea to continue contributing to 529 plans, at least up to the amount that you get for a state tax deduction, if that's available to you. All of these longterm investments, I wouldn't change anything just because we're fearful that we might go into a crappier stock market or a downturn in the market. Continue to do those things. You're gonna benefit from it in the longterm because hopefully by the time you take the money out for these things, the stock market will be much higher. Maybe that's 10 years, 15 years, 20 years out from right now. You'll be happy that you did max out all these accounts this year. And then number three is something that I've never talked about and never thought that I really would talk about, and that is investing in I-bonds. So you could buy I-bonds directly from the Treasury. I'll put a link to the website down below, but you wanna educate yourself on this first and understand how they work. But basically, they are bonds that you buy that have an inflation piece to it. So right now, they are currently paying an annualized rate of 7.12%, and you buy them directly from the Treasury. So they're guaranteed by the faith of the government. Now there are some nuances to this, like for example, that rate is only guaranteed for six months, and then it could drop significantly if the inflation expectations go down from here. Also, you have to hold them for a period of five years. So if you sell before that five-year period, then they will charge you a penalty of three months' interest. So you could find yourself getting the 7.12 rate for the next six months, and then they could drop off significantly, where if you're holding it for five years, the average over those five years might be much lower. But it is a very attractive rate right now, where you could get 7.12% guaranteed. That is a nice rate, so it's worth looking into. Another thing is you could only buy up to $10,000 worth of IBONs in a calendar year. So if you're married, you could buy 10,000. Your spouse could buy 10,000. You could buy them in a child's name as well. You could buy them in a company's name. So there is a way to get a little bit more exposure, but they do have that dollar limit, and it's on a calendar basis, the $10,000 limit that you could buy. But for safe money, to just park some money somewhere, not a terrible place to park it. Even if you end up paying that three-month penalty down the road, then obviously it's gonna wipe away some of that interest, but it's better than getting 0% in a savings account right now. So it's at least something worth looking into. And then number four is something that I have been talking about for at least a year now, maybe even longer. And I think the best way to do this is to dollar cost average into it, not to jump all in right now, but to be buying some gold and also some Bitcoin. So maybe you take a small percentage of your overall portfolio and you allocate it to these two asset classes, especially if these are things that you own none of. I think it's a good diversifying piece that gets you some less exposure to the stock market, and they might actually do well during a downturn in the economy. They haven't been proven, Bitcoin has not been proven to do well in high inflationary times or in a sell-off in the stock market. It seems to be tracking the technology sector more and more each day now. So we just don't know where it's going to go and if it's gonna act as a hedge against a downturn in the economy. But over the long term, I think it's a good idea to dollar cost average into these things and have them be a small percentage of your portfolio. So even if it's only 5% between the two of them, at least it gives you some exposure to an asset class that really is not correlated or is different than everything else that you're currently holding in your portfolio. And then number five, if you wanna continue investing in the stock market, either through dollar cost averaging, adding to a brokerage account, or if you wanna reallocate some of your existing portfolio, a good move might be in this environment is to focus on companies that have strong balance sheets, that have steady earnings, that pay dividends, kinda getting away from these high-flying tech companies that have been beaten up, that their earnings are just not there, where their future earnings are dependent on a lot of things and higher interest rates are really going to hurt the future growth of those companies. So moving into things like financials or healthcare, energy companies with high dividends, allocating a portion of your portfolio to that if you're not already exposed to it, it might make some sense. So basically getting more defensive and more diversified and trying to allocate your portfolio for the headwinds that really might come and result in a negative equity market over the next year. You wanna position yourself defensively so that you don't get beaten too badly if we do go through a very big downturn in the market. Now when I invest in the financials or the healthcare sector or the energy sector, I just use ETFs. I use exchange-traded funds. I use the SPDR ETFs typically to invest in those sectors. I just find that I would rather own a basket of the stocks in each of these sectors instead of trying to place a bet on individual companies in there. So I like to be well-diversified. I like using index funds. And to add these, I add them as my satellite positions. You've probably heard me talk about core and satellite positions. So I think adding these around my core positions is a good idea. I'm still investing in the large cap tech companies like the FANG companies. I'm not moving away from those things. I'm just taking some profit off the top, reallocating it around and making my portfolio overall a little bit more defensive. And not just my investment portfolio, but also my overall financial statements, right? Paying down the debt, building up my cash, just getting in more of a defensive position and lowering my expectations. I don't think that the next five years are gonna be anywhere near as good as the last five years. So you have to come to that realization that markets just don't always go up and you wanna be prepared for that. And you have to have realistic expectations of return. And real estate is another one that I talk about all the time. I'm not buying any real estate right now, especially as mortgage rates are going up. I actually sold a couple of homes over this last year, which I've talked about many times on this channel before. So that's where some of my cash is right now. I did dollar cost average into Bitcoin a little bit using that. I have bought a little bit of gold using that cash. But for the most part, I am paying down like I had a home equity line of credit that I've been aggressively paying down. So I'm doing all these things that I'm talking about in this video. Does that mean that they're right? Who knows? Only time will tell. But I'm just trying to get myself in a more defensive, stable position just to weather any kind of storm that we have. But this could be over shortly. We don't know what it's going to look like, right? The economy is still very strong right now. That's why we think that increasing interest rates, it's actually a good thing. We've been at zero for way too long. So the economy, they should be able to support these higher interest rates because the growth of the economy is so strong. And there's still so much liquidity and money in the system from all the money printing and the stimulus. So I'm not saying we're going to fall off a cliff right here. I'm just saying I think it makes sense to get a little bit more defensive and to be on solid ground and not take tremendous risks right now with the current environment. So I hope that you found this one helpful. Please make sure to hit that like button if you enjoyed this video. I'll see you again in the next one. Thanks.