Where to Invest in 2024

hey what's up everyone and welcome to the school of personal finance so 2023 we went out with a bang the market finished much higher the S&P was up a little bit over 26% for the year and a lot of people were on the wrong side of that trade many people were very bearish going into the end of the year thinking that the market was going to fall off a cliff and it did the exact opposite so here we are 2024 the market pretty much has gone nowhere in the first couple of weeks we started out slow and now it's kind of rebounded back to where it finished last year but everybody's opinions they are all over the map this year A lot of people are calling for Doom and Gloom thinking that we're about to hit a double top right here in the market from two years ago and head back down other people think that we're going to be Off to the Races making new highs so I wish I had the answer for you I wish I knew where this Market was going but in this video I'm going to share my opinion which is all that it is and also talk about some places where you could look to invest in 2024 I hope that you find this one helpful let's get to it my quick disclosure none of this is investment advice this is all for educational purposes only I don't have a crystal ball I don't know where the markets are going my opinion it doesn't mean anything in the grand scheme of things all right so let's Jump Right In and I'm going to share some charts with you as we go through this so the first one I want to look at is the S&P 500 and the aggregate bond market index performance since 1990 so as you can see right here the market we had a big year last year and the bond market had a little bit of a rebound as well with a lot of it coming in the fourth quarter last year but the S&P 500 if we go back all the way to 1990 it's amazing that there have only been 1 2 3 4 5 6 seven down years since 1990 and three of them happened in a row in 20002 2001 and 2002 and you can see we had a lot of big years right before that leading up to the tech bubble bursting as we look at the last few years 2022 it was a miserable year for both the stock and the bond market as you can see the bond market which is this orange bar right here this is the worst performance that it had over this entire period and there have only been a few years where the bond market has been negative right we could count them here 1 2 3 four five years that the bond market was negative since 1990 so overall the stock market and the bond market have performed pretty well since 1990 now this chart this is what we call a quilt chart where you can see the S&P 500 in red the performance of the S&P throughout all of these years and this blue one is if you had a balanced portfolio so you could see the black line connecting it where most part it's in the middle because it's a balanced portfolio and some things that stick out like Commodities have been down close to the bottom for a long time fixed income down towards the bottom and the S&P 500 has been towards the top we've had a couple years where small cap is outperformed like in 2020 2016 2013 was a big year for small cap and 2010 but the S&P 500 has really performed well and we don't know what's going to happen in the future this is why it's very important to stay well Diversified small cap K out perform this year Commodities could outperform this year Emerging Markets could outperform we just don't know and because the S&P 500 has been so strong markets typically revert to the mean meaning that the S&P could very well not perform at the same level that it has been over the last few years and we might play catchup with some of these other asset classes now here's another chart that I found interesting this is different asset allocations and the performance since 2008 so as you can see from 2008 we had the Great Recession right and then the market started going up from there but it took all the way till about 2016 the end of 2016 before 100% stock portfolio surpassed a 60/40 allocation and then after that it has been Off to the Races so as you can see right here this is where it surpassed that and then 100% stock portfolio it has just blown everybody else away where 100% bonds has been down here so if you started investing at the market bottom and you you are 100% stocks this is from going back from 2009 then you are up 327 in 100% stock portfolio where if you're 100% bonds you've only been up 58% over that same time period and then you can see if you had a 60/40 portfolio you've grown 214% and if you have a 4060 portfolio then it grew 157% so I found that interesting that there was a period of time where they were all neck and neck competing with each other and then at the end of 2016 US stock market basically it's just uh beat all the other asset classes by a lot during that time and this chart here this shows the performance of The Magnificent 7 since the beginning of 2020 where they have just blown everybody else away right So Meta Amazon Apple alphabet Nvidia Microsoft and Tesla they are up 271 per since the beginning of 2020 compared to the NASDAQ which is up 67% and the S&P 500 which is up 48% during that time so yes if we all would have just bought the Magnificent 7 back in the beginning of 2020 we'd all be much happier and richer right now and now with all the headwinds that this economy faces right now being an election year the chaos going on all over this world there's so much doubt and uncertainty and people are scared and they don't want to stay invested this chart shows what would happened if you bailed out of the market after the crash of 2009 and went to cash so one example we show going to cash and never going back where you would end up with $140,000 the next line the yellow line shows if you would have moved to cash for one year and waited for things to get better and then went back into the stock market in that instance your portfolio would have grown to about $500,000 and then the blue line that just shows if you would have just done nothing and just stayed the course and buy and held your portfolio would have grown to $821,000 so it's so hard to time these markets and when the market is going down yes everybody's gut instinct says get me out I don't want to feel the pain but history has taught us that it's typically the wrong thing to do so now we found ourselves eles in a different predicament right now the Market's really at all-time highs so it's not like you'd be selling out at a crash right now which makes it a little bit more enticing right where it's like well if I get now I'm getting out before the crash but we just don't know when that's going to happen people felt that way a year ago in the beginning of 2023 thinking you know what this Market's going to continue going down get me out of here and they missed a huge runup in the market so if only it was that easy that we could all time the market and get out at the right times and then get back in at the right times but now with that being said is it smart to change your allocation to maybe rebalance things a little bit and invest a little bit more in areas that you might be underinvested in and to that I say yes and to being very well Diversified as well I always think that that is a smart move like yes you won't hit the home runs as if you just invested in the Magnificent 7 starting in 2020 but nobody knows what the next magnificent 7 are going to be so it's very hard to play that game all right so now this chart here this is showing interest rates the 10year and the 2-year treasuries and as you can see we have a 42-year trend of declining interest rates they hit that peak in the early 80s and we've been going down ever since but this past year we have felt the pain of rates rising and here we are with a 10-year treasury around 4% and everybody feels like rates are so high but historically they're not really that high where do they go from here nobody really knows so if the interest rates If the Fed starts lowering interest rates and we see the 10 years start to come down that should be good for Bond Holdings right if you have a Total Bonds market fund it should perform well if we see this 10e go from 4% down to 3% down to 2 and a half% your bond portfolio will do well in that environment but we all felt the pain like in 2022 when rates shot up and bond portfolios got obliterated so right here could rates go higher they definitely could we could see the 10-year go to 5% nobody really knows could it go back down to 3% yes it could but having bonds as overall piece of your portfolio depending on your age and your risk tolerance it is a good thing to do it does soften the blow in years of declining stock prices and now what about developed and Emerging Markets they've underperformed the us for a while now could that change it's definitely a possibility if you don't have any exposure to develop in Emerging Markets it could be a time to add some of that because we just don't know what's going to happen in the future and that goes for midcap and small cap companies as well they have not performed as good as the large cap especially the large cap growth so should you have a little bit more exposure than you have had over the last few years and if you haven't touched your portfolio if you haven't rebalanced It All Odds are the S&P 500 the large cap companies is a larger percentage of what maybe you want it to be right now because it has continued to grow taking up a larger percentage of the overall pie so it's definitely worth looking at your account and thinking about rebalancing and adding to places that have not done as well over the last few years and then what about Commodities should you have more exposure to Commodities in your portfolio so they haven't had a great ride over the last 10 years years 2022 was a good year for Commodities but I would make the argument that I would like to have more Commodities in my portfolio than maybe I did a year ago and included in that is definitely something like gold I like having gold in my portfolio here's a chart of gold since 2007 and you can see that it is underperformed the stock market but here we are we are hanging out at alltime alltime highs for gold and it very well could break out from here this position in this chart so having small exposure to gold in your portfolio I would say you don't want to have any more than 3 to 4% in your portfolio in something like gold but I think there is a place for it just in case the dollar continues to go down in value and we see gold just explode higher with the deficit everything going on in the world I don't think gold is a bad thing to hold in your portfolio right now and what about Bitcoin right we have the Bitcoin ETFs that were approved by the SEC so now it's become very easy for everybody to own Bitcoin inside of their portfolios just by an exchange traded fund so here's a quick chart showing Bitcoin versus the US dollar so you can see when the doll goes down Bitcoin tends to go up they typically have an inverse relationship now Bitcoin just in 2023 it went all the way from you know 18,000 close to 50,000 so it has had a big run over the last year but it hit a high of like 70,000 back in 2021 so it dropped almost 85% I mean it is very volatile right so you have to have the stomach for Bitcoin but again I don't think it's a bad idea to have small exposure to it inside of your accounts just in case Bitcoin really does do what many people many smart people out there believe that it could do and grow 10x from here so if that's the case you might want to have a small little bit of Bitcoin inside of your accounts so you could participate that if it does happen but it has to be money that you're willing to lose if we see Bitcoin go all the way back down to 15,000 or so you don't want to have a huge percentage of your portfolio at that kind of risk and then what about real estate do you want to have real estate in your portfolio I would argue yes you do through REITs right so having exposure to the commercial real estate Market residential real estate market to the companies that invest in real estate I think that it's good to have a portion of your portfolio a small portion invested in real estate and that that makes sense you might know that I'm a big fan of O owning physical real estate and owning rental properties I like to take that approach so yes I do think you should have real estate in there as well here are some other sectors that pay high dividends that you might want to have exposure to inside of your portfolio depending again on where you are in life what your risk tolerance in is and all of that jazz but as we can see here energy 3.7% dividend yield utilities real estate Consumer Staples materials all of these have over a 2% dividend yield so does this belong inside of your portfolio yes I would make the argument that it does so as you can see when somebody asked me where should you invest in 2024 my answer is everywhere I think that you should own some of everything because we don't know what's going to do well what's going to do bad do you want to be defensive maybe it depends on your time Horizon what you're using the money for your risk tolerance and all of that if we're talking 30 years out then not no I'm not getting crazy defensive right here even though I do believe that we could have a down year in the market or not a great year but I'm not running for the hills because I'm not that smart I don't know if that's going to happen or not and I don't want to miss out if we do have growth because I have a very long time Horizon so even if we do have a down year two down years then that's okay because I have another 30 years and as I go and I look back 50 years I can see that a majority of the time the market is up so I'm willing to live with the risk with the roller coaster ride with the ups and downs of the market because over the long term I am confident that the US economy that the world will still continue to grow even though it feels like we're going to hell in a hand basket right now I do believe that it will continue to grow and I'm willing to put my money there for the long term well that's it for this one I hope that you found it helpful please make sure to hit that like button if you enjoyed it subscribe to the channel if you are not subscribed already and I will see you again in the next one thanks