The Upcoming Stock Market COLLAPSE and How to Prepare For It

So did you open your broker app this week and feel your stomach drop a little? Google just had its worst day in its entire history. Amazon fell about 7%. Intel lost about a quarter of its value before the market even opened. And the Nasdaq is down around 10% from its all-time high. But while all of that was happening, there were some ETFs like SCHD, which is a super boring dividend paying ETF. It actually hit a new all-time high. So in today's video, I'll show you what's actually I'm actually going on in plain English how I set up my own money so weeks like this don't keep me up at night. And five things that you can do right now if this market has you pretty nervous. And just like what I say in all of my videos, none of this is considered financial advice. You want to make sure that you always do your own research and invest in whatever it is that you're most comfortable with. So what actually happened? Well, this week, a lot of the biggest tech companies reported earnings. This is basically their report cards for the last three months, and Wall Street did not like the grades. Alphabet, that's Google's parent company, fell almost 13% in one day. Amazon was down about 7% the next morning, and Intel dropped around 25%. Now here's the confusing part. Many of these companies are still making money. Amazon still made a profit of around $1.89 a share last quarter. So why Why is everybody selling? Well, it's because a lot of these companies are spending a lot of money. Amazon says it's going to spend about $220 billion this year, mostly on AI. This includes data centers, chips, servers, and for the second quarter in a row, more cash went out than came in. And Google pretty much had the same problem too. So you can think about it like this. Say your neighbor makes great money, then in the same year he... He puts in a pool, then he redoes his kitchen and adds solar panels all at once. He's not broke, he still has a great job, but if you lend him money, you probably want to know when all of that spending would start to pay off. And basically this is where Wall Street is with all of this AI right now. Nobody's saying that these are necessarily bad companies. They're just saying, okay, show me that it's actually worth it. And when big investors get nervous, that money, of course, it doesn't just disappear into thin air. A lot of it just moves. Okay, so before we get into what to do, Just be honest with yourself for a second. When you saw those headlines this week, how did you actually feel? Were you excited? Like nice, like a lot of this stuff is on sale. Or did your chest get pretty tight and you just started thinking about just selling everything in your portfolio? CNN actually has a tool for this called the Fear and Greed Index. It basically rates the whole market from zero, which is extreme fear, to 100, which is extreme greed. And yeah, you can pull this up anytime, but the index that matters more is the one in your own head. Because how you feel during a drop tells you a lot about how your money is set up. Back when I was teaching six In sixth grade, we'd have a fire drill pretty much like every quarter or so. And the first one of the year was always pretty chaotic. Like kids were yelling, they were going the wrong way, they were jumping around. Some of them were like crying or some of them were also laughing too. But by the third or fourth drill, they just line up and walk out. Nothing about the alarm changed. They've just been through it before. And pretty much market drops are the same. The more that you go through them with a plan, the calmer you get. Financial planner Carl Richards has a name for what happens when we don't have a plan. He calls it the behavior gap. And it's basically the difference between what your investments actually return and what you actually end up with. Because you got scared and sold low or you got greedy and bought high. And if your portfolio dropped more than the market this week, maybe like 20 or 30%, that's usually a sign that maybe you're a little bit too heavy in a few companies. So I've talked to a lot of people where they put a lot of their money into just individual companies like Nvidia or All in Google or AMD or Intel because those were the ones that were going up. And yes, I totally get it. But when you have a handful of companies in the same industry, They usually go down together. JP Morgan actually studied this. They looked at thousands of US stocks going back to 1980 and around 40% of them dropped 70% or more from their peak and never came back. This is why I usually say in my classes and live streams that you always want to make sure that you're diversified. And for most people, the simplest way to do this is with investing in exchange traded funds or ETFs. Now, let me show you what I do with my own money. I usually like to keep somewhere around like five 10% of my portfolio in cash and I know plenty of people will say that that might be a little bit too much in cash but again this is what works for me. This is what makes me feel a little bit safer and sleep better at night. I always get people saying Steve you should invest a hundred percent of your money at all times and to be fair over long stretches being fully invested usually does come out ahead but again for me I just like keeping some cash just as dry powder so that whenever there is some sort of market pullback or correction I just feel emotionally a little bit safer and I can have a little bit of money to buy some of my favorite stocks and ETFs at a discount. And remember, this cash isn't just sitting in a regular checking account doing nothing. So at Fidelity, it gets swept into SPAXX, which is a money market fund. So it's still earning interest while it just waits there. So if you got, say, like $100,000 invested, 5% to 10% is around $5,000 to $10,000, and you'll never have to sell stocks to get it. So real quick, the best gift that I can give someone who's behind with investing is something that I should charge for, but I'll actually make free. And that's exactly what I'll give you. So my team and I have worked with more than 5,000 people in our community to put together a roadmap that will help you set up, diversify, and automate your portfolio in under 14 days. If you want a simple diversified portfolio that doesn't require picking risky individual stocks or do any day trading, this is for you. So if this sounds interesting to you, you can get this roadmap absolutely free and I'll send an invitation to my next investing class or potentially invite you to talk to one of my team members to see how we can help you one-on-one. The roadmap is my free gift to you. Just put in your information down below and I'll send it over right now. Okay, now let's talk about the ETFs a lot of you own because I talk about some of them all the time. There's QQQM, VUG, VGT. These are tech and growth ETFs and I know I like them too. But if you own all three, you don't really own three different things. Nvidia, Microsoft, and Apple are near the top of all three. So when big tech has a week like this one, all three tend to basically just go down together. And yeah, this has happened before. When the market gets scared, tech and growth usually fall the fastest. In 2022, QQQM lost about a third of its value and the S&P 500 lost about 18%. While value-focused ETFs like SCHD and VYM only lost a few percent. Now, I'm not saying that you should Put all your money into ETFs like SCHD. The bigger point is that value companies, the ones already making steady profits, don't always move the same way as tech. Over the last few weeks, while QQQM was dropping, VYM, SPYD, and SCHD held up a lot better, and companies like Costco, Walmart, and Coca-Cola actually went up. So what do you do with all this information? Well, you don't have to sell all your tech ETFs because I'm not selling any of mine, but you can balance them out with things that don't overlap. Like with companies inside, again, SCHD, VYM, or SPYD. There's also consumer staple ETFs like VDC, which also holds companies like Costco, Walmart, and Coca-Cola. And you can also keep a little bit of your portfolio as cash in a money market fund. Because remember, cash is a position too. And by allocating your portfolio this way, when one part of your portfolio has a bad week, another part might be doing fine, like what we're seeing right now. And if this week honestly made you feel sick or you're watching this video So in a far away future where there's another stock market drop, that's not a reason to panic sell. For most people, it's a sign to set your portfolio up so the next big drop doesn't feel like this one. Because I'm going to tell you right now, there will always be market pullbacks and corrections in the future. It's just a normal process in the stock market. So here's what I would actually do. First, I would zoom out, pull up a chart of the S&P 500 over the last 30 years, and you'll see that with 2000, 2008, 2020, 2022, every one of those felt like the end of the world. Historically, the market has recovered from all of them and kept going about 10% a year on average. This means if you put around $500 a month in for 20 years at that 10% average annual return, you would have have put in around $120,000 of your own money and now it could be worth around $350,000. And when you look at it, that's with all of the crashes along the way. And that's really how regular people build wealth, just by staying invested through all of it. And here's the thing, checking your app, your brokerage every day actually makes it worse. Two researchers, Shlomo Benazartzi and Richard Thaler, call this myopic loss aversion. Losing money feels about twice as bad as making money feels good. So the more often you check, the more red you see, and the more likely you are to do Do something that you'll probably Probably regret. The second thing is to be careful with the headlines. Every single year, there's something scary. And if you've been on finance YouTube this week, you've probably been seeing all these thumbnails with red arrows fire in the background and people grabbing their heads. And I get it. Scary gets clicks and clicks pay creators. Psychologists call it negativity bias. Our brains pay more attention to bad news than good news. So that's what gets put in front of us. And yes, I admit my social media team probably made a thumbnail of me which proves my point with you clicking in and watching this video. Third is to automate everything. Set up automatic contributions every week or every month and let dollar cost averaging do the work. So say that you put in $500 a month and your ETF is around $100 a share. You get five shares. If it drops to $80, that same $500 gets you six and a quarter shares. You're basically able to buy more when it's on sale and you didn't have to make a single decision. Fourth, if you own dividend ETF, When you buy ETFs, you just wanna remind yourself that you're still getting paid. Even when prices drop, dividends usually keep coming and you can reinvest them and pick up more shares while they're cheaper. And while you're at it, you can make a watch list. Write down the ETFs and stocks that you love to own more of so if the prices keep falling, you already know what you want to buy. And fifth, this one is a little bit more on the advanced side but if you already own at least 100 shares of an ETF or certain underlying stocks, you can sell cover calls against them. You can collect some income now, which lowers your cost basis. And you can use that money to, again, buy more shares of your favorite ETFs or stocks. And like what I've said in my other cover call videos, you need to have at least 100 shares to sell one contract. And if you want to learn more about cover calls, I made a whole bunch of videos in the past that you can check out later. All right, so let's bring it all together. Yes, tech got hit hard this week, but these companies are still making money. And a lot of that money is just being moved into boring companies that people trust. If this week stressed you out, it's okay. You can use it, you can learn from it, and basically you can assess your own risk tolerance. You can think about keeping some of your portfolio as cash. You can see if you're maybe too heavy in certain particular individual companies or ETFs. And basically you can balance some of these high-tech growth ETFs with more of these consumer staples or these boring companies. Then I would say, zoom out, tune out all the noise, automate, and just keep on collecting those dividends to dollar cost average in. Remember, we're all here as long-term investors, so we're investing for the next, say, 10, 15, or even 20 years, not like the next three months. And remember, this is what I do for myself. None of this is financial advice, so you always want to make sure, hey, What fits your own risk tolerance? What works for you? All right, if you're a beginner and you want to learn more about investing in the stock market as a complete beginner, you wanna see how I allocate my portfolio, some of the strategies that I use, you can always download my $1 million investing roadmap down below. I hope my resources helped. I hope this video helped and I will see you all in the next video here.