How I’m Prepping For the Next Stock Market Crash

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“U.S. stocks are now about 80% overvalued,” proclaimed the well-known economist Andrew Smithers. Billionaire Carl Icahn stated, “The public is walking into a trap as they did in 2007.” Robert Kiyosaki and Warren Buffett are even saying that the next stock market crash will soon be here.

20160624 - looming stock market crash

By now it’s no secret. The stock market has been teetering for nearly a year and the next stock market crash will soon be upon us. It might be tomorrow, it might be next month, or maybe it’ll even stave itself off for a full year. There’s no mistake about it though. It’s coming.

So the next logical question is, “Okay…what do I do about it?”

How I’m Prepping For the Next Stock Market Crash

Now I’m no investment professional, so I’m not going to tell you to invest in this company or that company. I’ll leave that decision up to you. But, I CAN tell you what I’m doing to prep for the looming stock market crash.

1) Got Completely Out of Debt

People get foreclosed on all the time, but for some reason nobody thinks it will ever happen to them. …And then life happens:

  • job loss
  • a medical emergency
  • the death of a spouse

Suddenly, people find themselves on hard times. I DID NOT want to be one of those people. That’s why I decided to take matters into my own hands (instead of the bank’s) and paid off my mortgage.

When that next stock market crash happens, I won’t be afraid and tip-toeing around at work, just hoping to keep my job. I’m going to be completely debt free and financially independent, hunting for those opportunities when everyone else is afraid.

The name of the game – be greedy when others are fearful. That’s how you get ahead in life. And to do that, you’ve got to be financially confident. That’s why I ditched all my debt.

2) Hoarding Cash for Real Estate

next stock market crashWhen you get rid of all your debt, this crazy thing happens. You can actually start to save up money! And I’m not just talking about a few hundred bucks here and there like you’re used to today. I’m talking about thousands of dollars every month!

Think about it. If you had absolutely no payments on:

  • your car
  • your student loans
  • or YOUR HOUSE

How much extra money would you have each month?

….$300+$400+$1,300… Yeah, probably about $2,000! Isn’t that crazy?! Get out of debt and all that money goes into YOUR account instead of the bank’s.

So what do we do with all that money? We’re buying real estate.

On November 30th last year, we bought our first investment property – a single family home for $81,000. We bought it with cash. After property taxes, insurance, and maintenance, we clear $900 a month — that’s $10,000 a year!

Why are we doing this? Two reasons.

1) As a hedge against the stock market.

If the stock market tumbles, people will lose their jobs, lose their homes to foreclosure, and will need a place to live. Demand for rentals will go up, which means I’m going to make even more money in a down market than a prosperous one.

If the market never tanks, we’ll still keep enjoying our $900 a month because the house is in a great location and remains highly desirable as a rental.

2) A great investment deal will come in a down market

The real estate market is unbelievably hot right now. We bought our first property less than a year ago for $81,000 and could easily sell it for $120,000 today. This is great for our net worth, but it sure makes it tough to find another deal!

The best move for us right now is to pile up the cash and wait for the down economy. When more foreclosures flood the market during the next stock market crash, the more likely it is that we’ll find a unbelievable buy on the next investment property.

We have a plan to save up $80,000 by December 2017. At that point, we hope to find another diamond in the rough and earn another $1,000 a month in passive income!

3) I’m Still Investing in the Market

Even though I think the market is going to take a dive later this year, I’m still investing heavily into my 401k. Why? Because I don’t plan to take the money out any time soon (like, not for another 35 years… 😉 ).

My logic revolves around dollar-cost averaging. Basically, I have the mindset that the stock market is about to go on sale. This is my chance to buy up a bunch of shares at 10% off, 20% off, 30% off…heck, maybe even half off when the market reaches the trough. And, if I buy all these shares on the way down at a discount, when they come back and are worth the same amount or more, then I suddenly have a whack-load of money sitting in my retirement account.

4) Invested in Silver and Gold

I did some research about a month ago and came to the realization that now is the time to invest in silver and gold. But not in the physical commodity — Read why here: How to Buy and Sell Silver) — but rather in market shares that model the price of silver and gold. The best way to do this? Through a Motif.

What’s a Motif?

It’s a group of stocks that you can select and only pay one transaction fee for, which is absolutely amazing!

Typically, you’d buy a few shares of one stock, pay a transaction fee. Then, you’d buy some shares of another stock, pay another transaction fee… Before you know it, you blow $100 on fees alone! With a motif, you pay your $10 and purchase all your stocks at once.

Here’s a look at my motif (that actually someone else created, but it had exactly the mix that I wanted):

20160624 - motif investing

I diversified my silver and gold investments, but put them all in this one motif and paid a piddly $9.95 for the entire transaction. Honestly, I think this is such a great deal that I already became an affiliate and have an even better deal lined up for you!

Sign up through this link – Invest $2,000 through five motifs, and they’ll give you $150!

Want instructions on how to sign up? Comment below and if I get enough demand, I’ll whip some instructions up for you all so that you know exactly what to do.

…Anyway, enough of the sales pitch (I really can’t help it, it’s such a great deal!). You probably want to know how much I invested and why I chose silver and gold.

For now, I just put a couple toes in the water and invested $1,000 into the one motif. We typically don’t invest money into the market outside of our 401k, so a thousand bucks was the amount that we were both comfortable with at the time. We’ll likely up this amount in the future.

So why silver and gold?

Simple. It’s a hedge against the market.

Typically, when the stock market goes down, gold and silver go up. Since I think the market’s going to tank, why not invest in gold and silver, watch my holdings go up as the market dives, and then sell the shares when we’re ready to buy an investment property in the trough? Sounds like a sure-fire win to me.

Basically, I’m making this investment for a year or two and plan to remove it to help fund the next foreclosure deal.

What Do You Think?

So what do you think about my plan around the next stock market crash? It’s pretty simple:

  • Pile up cash
  • Continue to invest in the market with index funds
  • Invest in silver and goal
  • Buy a deal on a property when the market’s down

Would you do the same? Or do you plan on doing something different?

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11 comments to How I’m Prepping For the Next Stock Market Crash

  • This sounds like a pretty good plan to me and one I’ve always told others seems to be the smart thing to do. I honestly never worry about the market crashing considering I’m 30+ years away from retirement. I’m glad I’ve read this though because even though I’m not in a position to purchase investment property (which I would love to do), when the market begins going downhill, I know that I can focus on contributing to my 401k more while shares are going on sale. Thanks for sharing your insights with us. Interested in hearing what others plan to do.
    Latoya @ Life and a Budget recently posted..How to Earn Passive Income on Etsy

  • Chris

    I love your approach here! It’s very sound and goes counter to much of our culture (which I honestly believe these days is the right path about 90% of the time – and not just financially). I’m especially impressed with your commitment to buy rental income properties with CASH and not leveraging like so many people do (both successfully and unsuccessfully).

    At the core of this is the philosophy of reducing risk tolerance. I’m like you (now) and want absolutely nothing on the liabilities side of my finances (despite my 700K net worth). My only liability remaining is the house (value 295K, mortgage balance 135K, 10 yrs left on a 15 yr note at 3.25%) So many would say don’t pay that off… “that’s a great rate” or “you need the deduction” or “there’s better returns here”. Hogwash!! A liability is a liability in our way of thinking and once eliminated it opens up so many other options.

    So that’s why I’ve been saving like crazy this past year or so and have managed to gather around 100K (building with contributions each month in a money market savings account earning 1%). In one more year I will have enough saved to pay off our 135K mortgage with a lump sum payment and be completely debt-free! I know most people pay extra each month but with my method I remove even more risk.

    Anyway, once the mortgage is done we are going to do exactly like you and start buying rental properties with cash in distressed areas of the country or locally in distressed economies. The nice part is with no liabilities (and a commitment to modest living) we should be able to save around $70-80K each year. With that kind of saving rate I’m hoping to be buying rental properties for cash each year to really establish some passive income for the rest of our lives. But the kicker is if something should happen (God forbid a job loss or an illness or whatever) we are not leveraged and instead approaching life’s challenges from a position of financial power which honestly can’t be quantified on all the geeky spreadsheets we love to make.

    P.S. I enjoy your writings very much. Keep up the great work!!

    • Everyone looks for the quick win – buying penny stocks, trading options, or flipping houses. It can work at times, but it also comes with huge risks. The low-risk options are how people consistently get rich – rental properties, building a business from scratch, or just plain saving aggressively all their lives. It’s typically not flashy and won’t win any ‘best story’ awards, but it creates wealth almost every time. AND, the slow, low-risk options work amazing well in down markets. 😉 Thanks for reading Chris! Glad to see your comments!

  • One of the investors above had a caveat to their thinking. Robert Kiyosaki said that as long as the Fed keeps rates near 0, the market would continue to rise.

    With the Brexit vote, I think the Fed will keep rates low for another 12 months. Perhaps it’s a good time to think about how to make some quick cash on the volatility, then start planning your exit.
    Eric Bowlin recently posted..How to Take Advantage of the Brexit

    • Good point Eric. That is the one piece that will likely keep the economy propped up. But, there will come a time when even monetary policy won’t keep this economy afloat.

  • Tangible assets make sense as long as you can safeguard them. I like the idea of precious metals that can’t easily walk away.
    ZJ Thorne recently posted..Net Worth Week 11 – Brexit Begins Edition

    • Hi ZJ! I actually did some research on silver a few months ago (read my post here), and I discovered that buying actual tangible silver was a pretty bleak investment – mostly because it’s so difficult to sell. Typically, the only interested parties are dealers and jewelry makers, and they both want a discount off from the raw price.

      The only chance it has at becoming truly valuable is if the entire monetary system collapses and the U.S. Dollar becomes worth absolutely nothing….and I just don’t see that happening any time soon. That’s why I decided to invest with a motif of silver and gold ETFs.

  • It is a pretty sound strategy; however, I am not that big of a fan of silver and gold. Your strategy focuses on building depressed long term assets at a time of weakness (house or stocks), staying patient, and reaping the benefits when your long term strategy pays off. For me, I love stock market crashes because I am a long term dividend investor. So I have my list of amazing dividend companies such as JNJ, MMM, and other Dividend Aristocrats and will pounce if the price suddenly drops. Any strategy is okay with me as long as it centers on buying quality assets that will appreciate over time. Best of luck next time there is a crash!

    Bert, One of the Dividend Diplomats
    Dividend Diplomats recently posted..Industry Analysis: Grocery Store Stocks

    • Thanks for dropping in DD! I think the dividend game is intriguing and I’m confident investors can win there. I’m just not all that interested in it and would likely learn the minimum of what I should before investing. And that’s never the way to start when you’re putting real money on the table! On the other hand, I love real estate. That’s the center focus of my wealth strategy. The precious metal investments are just a small hedge on the bigger picture.

  • […] June 24th, I wrote about how I’m prepping for the next stock market crash. Today, just 12 days after I shifted around my investments (8 days after the post), I can already […]

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