BiggerPockets Money Podcast

BiggerPockets Money Podcast 116: Long-Term Investing: Coronavirus Changes Nothing with JL Collins from JLCollinsNH.com

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The stock market is up, then down, then down, then up. What is an investor to do?

Today we bring JL Collins from JLCollinsNH.com back to the show to calm our fears and help us understand what is happening with the stock market.

The market is falling. Or maybe today it's rising. It's SO VOLATILE, it can be scary to stay invested—especially if you've never been through a market downturn.

JL expertly explains what’s going on—and his recommendations for the best course of action—based on 40 years of investing in the stock market (and making a boatload of mistakes along the way).

Long story short, stay the course. Over 100 years of historical stock market data say this too shall pass.

While JL is an expert on the stock market, he doesn't invest in real estate, so Scott and Mindy share their views about the real estate market and what this current stock market volatility might mean for real estate investors. They also share ways to hedge your bets in rental property investing through fully funded reserves.

If you’re freaking out about the stock market, this episode can help calm your fears and keep you on the right course to give you the most chance for financial success.

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

Jim:
… So the market clearly, clearly is searching for a direction and it doesn’t quite know what to do and nobody, and certainly at least of all me knows what it’s going to do on Monday. I mean this could be, you know, today could have marked the beginning of the turnaround where it begins to just go up again. Or it could be what is charmingly called a “Dead Cat Bounce” where you know, Monday we’ll open up and we’ll be down even further. I mean nobody, nobody really knows. And, and that’s kind of the most salient point is because we don’t know, there is nothing to be done. There is nothing to be gained by trying to dance in and out of the market as Warren buffet once said, you know, you, you buy the market and you hold in your investing for the long term and this volatility is to be expected every now and again the market plunges, every now and again there are bear markets.

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Mindy:
Hello, hello, hello, and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen and with me as always is my steady stay-the-course cohost, Scott Trench. Scott and I are here to make financial independence less scary, less just for somebody else and show you that by following the proven steps, you can put yourself on the road to early financial freedom and get money out of the way so you can lead your best life.

Scott:
That's right. Whether you want to retire early and travel the world, avoid panic selling in a recession, go on to make big time investments in assets like real estate or start your own business, we'll help you build a financial position capable of launching yourself towards your dreams.

Mindy:
This is episode number 116 featuring Jim Collins from jlcollinsnh.com. You may know him better as a previous guest on our show number 20. He’s also the author of the famed Stock series, and the even more well-known book called The Simple Path To Wealth. Jim is here today to talk to us about the stock market, the state of the stock market specifically.

Scott:
Yeah. Today, Jim is going to talk about how to navigate this financial crash and his philosophy about longterm investing by staying the course in index fund investing. So spoiler alert there, he’s got great rationale for that, and I think it’s a really important point, that’s why we have really changed our podcast schedule to accommodate him and have him come on and give that advice to everybody. And then after Jim is done, if you want to stick around and you own real estate, Mindy and I will talk about how to think about your longterm real estate holdings in the context of this market dip, this correction, whatever we want to call it. The Coronavirus-caused market panic.

Scott:
So we’re going to talk about that stuff. And then we’ll invite you, if you have any questions, to join us on Facebook, email us, reach out. We know that we’re giving advice of stay the course, invest for the longterm, we know that that’s difficult, we know that that’s going to be a challenge for a lot of you, but we want to be there and help you and make sure that we’re helping you move towards your longterm goals.

Mindy:
Yup. We really want to help you out. Before we bring in Jim, let’s hear a note from today’s show sponsor.

Mindy:
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Mindy:
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Mindy:
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Mindy:
Okay, huge thanks to the sponsor of today’s show. Jim Collins. Welcome to the BiggerPockets Money podcast. I am very excited to have you back. You were here on episode 20, way back a couple of weeks ago. This is now episode 116. And I know you are a retired person and you’ve been retired for quite a while. I’m not sure if you’ve noticed because you’ve been traveling around the world and you are retired, the stock market has had a bit of action the last couple of days. Have you heard about this? And what are your thoughts on this?

Jim:
Yeah, actually, even that news has reached even me. Yes, I’ve heard about it. It is been a volatile a couple of weeks.

Mindy:
Volatile is a really great way to describe this market. This was the worst stock crash since October of 1987. Do you remember October of 1987? I do. Scott was negative three, but you and I were around then. I was a sophomore in high school and I still remember that day because the next day in the economics class, they talked about what a huge thing it was. And it was, “508 points and it was a 22% drop, and that’s enormous. And Oh my God, the sky is falling!” So this stock market has actually not crashed 500 points, it’s crashed more like 2,000 points. But, because we have grown so much since 1987, this was only a 7% crash as opposed to the 22% crash in 1987, so why are people freaking out about this?

Jim:
Well, people freak out whenever the market does something unexpected and whenever it drops. But your point’s well taken. Actually, 1987 was a much bigger drop than anything we’ve seen in this one. So for instance, today the market was up about 9%, yesterday it was down about 9%. But as you correctly point out, when the market dropped those 500 points, which seems quaint today, that represented a drop of 23%. I think the total market decline has Thursday’s drop came to 26 or 27% over a couple of weeks. And by the way, in ’87 that one day drop was not the only drop, then it continued to edge down for the next, I don’t know, three, four months before it turned around and began its relentless climb once again upwards as the market always does. And will do it again this time.

Mindy:
Yeah. Scott and I have a document that we chat back and forth with, and he said, “Wait, there’s like a 10,000 point crash over the past two-ish weeks.” And he’s right, I was talking about on Monday

Jim:
You’re talking about the S&P 500.

Mindy:
I’m talking about… Yes, on Monday, they had to actually halt trading, which is not something that they did back in 1987. And then they had to halt it again, what? Thursday. And we’re recording this after the market has closed on Friday, but the last couple of weeks had been quite crazy. However, as you just said, the market dropped in ’87 and then began its relentless climb as it always does, which I am quoting Jim Collins, I am not stating that officially, but he’s right.

Jim:
Well, you just stated officially.

Mindy:
So I am 100% agreeing with Jim. If you sold on Monday, your holdings would have dropped. The market opened very poorly on Monday, if you sold on Monday, you would have realized losses at some point from your high, at the very most, or at the very least. And by holding onto them on Friday, you would have recouped a lot of those losses. Most market recoveries are not that fast, but today we were up quite a bit. We were up almost 2,000 points. Monday they were down 2,000 points. I think in the middle there was the more down.

Jim:
Well, Thursday was down. So today, I think as I said, today was up eight or 9% but it was roughly up today the same amount it was down yesterday. So the market clearly is searching for a direction and it doesn’t quite know what to do. And nobody, and certainly at least of all me, knows what is going to do on Monday. I mean, this could be, today could have marked the beginning of the turnaround where it begins to just go up again or it could be what is charmingly called a dead cat bounce where Monday we’ll open up and we’ll be down even further. I mean, nobody really knows.

Jim:
And that’s the most salient point, is because we don’t know, there is nothing to be done. There is nothing to be gained by trying to dance in and out of the market is as Warren Buffet once said. You buy the market and you hold, and you’re investing for the long term. And this volatility is to be expected. Every now and again, the market plunges, every now and again, there are bear markets, they are healthy things, actually. Getting all upset and panicked about it is like living in Minnesota and being surprised that you get blizzards. I mean, it’s part of winter, it’s a natural part of the process.

Jim:
Now, every time what triggers the drop is different and what’s triggering this drop is a disease, and of course that’s scary on a whole different level, but if it wasn’t that, it eventually would have been something else. The only thing that surprises me is that this is really the first drop we’ve had since the big crash in ’07/’08. In December of ’18 right around Christmas, the market dropped 20% but it turned around so quickly then that most of us don’t even remember it. It was such a quick blip on the radar, but this one looks like it has extended a few weeks and my guess is it’ll extend a few more, but that’s only a guess.

Scott:
So let me ask you this. I think from maybe the three of us, we likely have a financial position that has some cash on hand, is very conservative where we’ve self-educated quite a bit on this topic and we’re very comfortable I think with the realities of the market, “Hey, I’m going to stay the course and continue index fund investing as I’ve always done and keep it in there and keep it in there for the very, very, very long term.” But suppose that we’re putting ourselves in the shoes of somebody who does not have a big emergency reserve, or has very little cash and is afraid of their job. What does that person need to be thinking about here in terms of their longterm investing approach or maybe needing to access that money? How do we frame that as a problem for them?

Jim:
Well, I think the first thing is that those are considerations that that person should have been thinking about before now. Now, in the middle of a market crash is not the time to try to sort through whether you should have an emergency fund for instance, or how much you should have allocated to stocks. That’s something best done when the waters are calm and the markets are peaceful, not in the middle of a turbulent storm. So that’s a whole different question. I would say to anybody, regardless of that situation, that you need to buckle down and stay the course for now.

Jim:
And then, if you found yourself in the position you described when things calm down, you probably want to reconsider and reallocate. If you’re in a situation where you have to have money to live on because you lost your job, well, then obviously you’re going to… and you’re fully invested in the stock market. First of all, you shouldn’t be. But secondly, you’re just going to have to draw down on those stocks when they’re down and obviously you want to draw as little as possible to meet the most basic needs and give your portfolio a chance to recover.

Scott:
Got it.

Mindy:
So what does Jim Collins consider a good emergency fund?

Jim:
I think that’s so variable, Mindy that it’s almost hard to answer. And it depends on your situation. So for instance, I don’t own a house, I don’t even rent an apartment at this point, we are completely nomadic. So there’s very little variation in our life that suddenly going to come up. We just bought a new car so I don’t have to worry about car repairs. So my emergency fund is almost nothing. I can tell by your expression you know we bought a new car, but-

Mindy:
I can’t believe you bought a new car. That’s no worst thing you could possibly do. You’re going to ruin your financial future.

Jim:
I’ve written three posts on it so you can check out why and why I’m not worried about ruining my financial future. So for us, I mean, an emergency fund is 20 bucks in my wallet. If you own a house and the furnace might go out, well you have a very different need or you might need a new roof. Or if you’re driving an older car, it may need a new transmission. So those are all the variables. Ironically, the less money you have, less wealth you have, the poorer you are, the more you need that emergency fund.

Scott:
I love that. So if I’m listening and I am on my way but not quite there, maybe not even halfway to financial independence. I like to think that you, that listener, actually have been preparing for a recession pretty over the past several years. You’ve got an emergency fund, you’ve been investing for the long term, most likely, and preparing for early retirement I think in a lot of ways is just like preparing for a recession. And to your point about emergency reserve, you’re right, the more wealth you have, the more stocks that you own, the less you have to have in cash because you can’t liquidate or you’re going to have higher dividends payments or whatever. And so there’s less need for that.

Jim:
You have more cash flow. The higher your cash flow, the less you need in emergencies. And the simpler your life, the less things there are potentially to go wrong. So, yeah. So anyway, the point is that the more you’re living… Ironically enough, the more you’re living paycheck to paycheck, the less resources you have. The more things you own, be it houses or cars or whatever, the bigger your emergency fund needs to be.

Scott:
Love it. So I love how simple and easy the message is here. Everyone is panicking, the sky is falling around, but it’s like if you’re getting sick or you do worry about your health. You need to have a good diet, you need it exercise, you need sleep right.

Jim:
I need to do all those things tonight.

Scott:
But you do all these things, and your risk of getting sick is low, and your risk of having serious health complications is even lower. If you track your spending, spend very little, control your big fixed expenses in particular by not buying the doodads that you just mentioned-

Mindy:
Like a new car. I’m just kidding.

Jim:
Says the woman who used to drive an NSX.

Scott:
Then your risk of having financial consequences because of a recession are very low and your risk of bankruptcy or anything to draw down meaningfully on your longterm portfolio is even lower. I think it’s the same analogy there. I’m David Green for the day

Jim:
Yeah. And I think people, when the market drops is it’s done recently and they’re dependent on it, the fear takes over and you lose sight of a couple of key things, a point that Mr. Money Mustache made to me years ago, which it never occurred to me. The total stock market index fund, which is what I favor, is a dividend of about 2%. If you’re living on your portfolio and you’re using the 4% guideline and you’re pulling 4% of your portfolio, you don’t even, not only when the market goes down, you do not have to sell all your stocks at a big loss, you don’t even have to sell 4% of them a year because 2% of that’s funded by the dividends. You just have to sell 2% of your holdings each year.

Jim:
And it’s a very rare market decline that doesn’t resolve itself within say five years. Most of them resolve themselves within a year, sometimes considerably less. The fluctuation in the paper value of your holdings only matters if you have the need to sell it all at once, or if you’re silly enough to be driven by panic and sell it all once, and then you lock in that loss. But if you’re just selling a little bit you need to live on, it’s probably not going to affect you very much, and you just let the rest ride for when the market inevitably turns.

Mindy:
Wait, wait, wait. I’m hearing you say that you don’t sell when the market drops significantly.

Jim:
No, you hold.

Mindy:
You stay the course? You hold?

Jim:
Of course.

Mindy:
You hold on?

Jim:
Forever.

Mindy:
Well, then why am I seeing-

Jim:
My holding period, Mindy, for VTSAX is literally forever.

Mindy:
Forever?

Jim:
And when I’m dead, my heirs will hold it forever and when they’re dead, their heirs will hold it forever.

Mindy:
Oh my God. You sound like Warren Buffet.

Jim:
The only selling that’s ever done is if you need to live on the portfolio, you’ll take the 2% in dividends that’s just selling off and then you’ll pull another 2% sale in of shares and call it a day. And that’s what allows you to ride out all of this volatility that the market periodically throws at us just to keep us on our toes.

Mindy:
Okay. So I’m seeing a lot of advice on the internet, which is…. I love that you laugh-

Jim:
And everything on the internet is true, Mindy.

Mindy:
That’s a quote from Abraham Lincoln.

Jim:
[inaudible 00:19:23]

Mindy:
I'm seeing things like, "I'm selling covered calls." And I'm like, "Why? Why would you do that?" Unless you're a stock broker and then even then, maybe that's not the best time to be doing that or maybe it is the best time. I don't know. I like to consider myself fairly well versed in money and I don't… I'm trying to think what is the covered call. I don't know enough to do that, so I'm not going to do that. I'm buying inverse ETFs. What are you doing, Jim?

Jim:
I'm just holding my total stock market fund that I own. The one thing I did, and I described this in my most recent post I put up a few days ago, is I noticed that as the market was dropping, it was dropping the value of the shares that I was holding in my taxable account to a break-even point And that was interesting to me because sometime in the next five years, there's a possibility we may give up our nomadic life, buy a house and settle down. And I looked at that chunk of money as the source of cash for that transaction if and when it happened. And I was also looking at the fact that I had a capital gain in it that I was going to have to give 20% to the government, the capital gains tax. But when it came down to where that capital gain went away, which is a bad thing, of course, because it's lost money, but it created the opportunity to sell at a break-even point, so there was no capital gain.

Jim:
And then I just took the equivalent amount of bonds in an IRA and switched them over to VTSAX, so my allocation didn’t change at all. And then now freed up the capital in the taxable account to where I won’t have to pay a capital gain when it comes time to spend it if that time comes.

Mindy:
If that time comes. And that is a detailed in your article called Taking advantage of Mr. Bear, which we will include a link to in our show notes, which are at biggerpockets.com/moneyshow116. We have a lot of things in there that we’re linking today, a guided meditation for when the stock market is dropping.

Jim:
Yeah. So that’s as a guided meditation, I recorded it at the suggestion of one of our Chautauqua attendees last year and I recorded it last summer, and it got a modest number of views when I first put it up.

Mindy:
It might get a few more.

Jim:
It’s gotten a whole lot more this couple of weeks.

Mindy:
And we will also link to that in our show notes.

Jim:
Yeah. Two other things you might link to in the show notes is I have a post called Why You Should Not Be in The Stock Market. And I wrote that post two years ago in 2018 when things were calm because not everybody should be in the stock market. And right now, this volatility is a great test of whether you should be in the stock market. If it’s keeping you up, if you’re worried, if you’re thinking, man, “I need to sell before I get out,” you should never have been in the market to begin with. So that’s a post that might help people think it through. The other one is called Time Machine And The Future Of Stocks.

Jim:
And that basically is interesting in this context because it looks back at the period between 1975 when I first began investing until, I don’t know, 17, 18 whenever I wrote that post and looks at all the traumatic things that happened in the world and to the market in that 40 plus period of time, a lot of the very much more dramatic than what’s going on now, and yet over that 40 years, the market postage just shy of a 12% return. And the point of that post is the market does not require perfect conditions so you have the great returns, but you do have to be willing to put up with the volatility. And all that means is you ignore it when it happens, stay the course and keep investing is if you’re in the wealth accumulation stage, if you’re in the wealth preservation stage and you have bonds, you might just your allocation and take advantage of the sale on stocks.

Scott:
I think it’s fantastic. I have a couple of things to go back a couple of minutes ago, you mentioned something called VTSAX. VTSAX for those of you listening who are not familiar with our terminology here is an index fund from Vanguard. It’s a passively managed index fund, is the Total Stock Market Index Fund and it’s Mr. Collins favorite fund, if I’m remembering correctly. And then the only difference between me and Jim here is that I use VOO, which is a Vanguard S&P 500 US-based index fund, so the whole terminology thing there. The second thing you mentioned is, you’re only going to lose in this market downturn if you have to sell your holdings and the only people who should be selling their holdings are people who are already retired who are selling 2% of their portfolio under the 4% rule, which we’ve talked about in previous podcasts as well.

Scott:
And that’s the only people who are going to experience a loss of economic power over the very long term from this market crash. All the rest of us who are still working, still contributing, still investing over the long term are going to see no long-term dramatic impact from this drop-off. All we have to do is keep staying the course. For me, that’s VOO, for you that’s VTSAX, for you the listeners, it’s whichever long-term index fund strategy you choose. Is that a good synopsis there, Jim?

Jim:
I think it’s very good synopsis, I do have a couple of things, Scott. One is that your VOO is an ETF, and the ETF version of VTSAX is VTI, same portfolio. And the question I get frequently is , “Wow, I own VTI, should I switch to VTSAX?” No, we’re on the same thing. In fact, VTI the ETF is a slightly better choice these days simply because the expense ratio is slightly lower. Now, in terms of the difference between a VTSAX and the S&P 500 fund you own, that’s another question I get a lot. It’s like, “Oh, my 401(k) only offers an S&P 500 fund, I can’t buy the total stock market. What do I do?”

Jim:
Well, they’re so close that it doesn’t matter. Both of those funds, whether it’s an S&P 500 fund or the Total Stock Market Fund, over time, we’ll track very closely, they’ll both serve you very well. At the end of the day, one will be higher than the others because that’s the way of the world, but there’s no predicting which that’ll be. So the fund you’re in and anybody who’s holding a similar fund, that’s just fine. People obsess over things they don’t need to obsess over. You don’t need to obsess over whether you’re in the S&P 500 fund as opposed to the Total Stock Market Fund. You don’t have to obsess over whether you’re in the fun version of the ETF version of those.

Jim:
You do have to obsess over whether you’re in an actively managed funds and paying exorbitant fees for lower performance or index funds and low fees and better performance. That’s where you want to spend your time.

Mindy:
So my husband that you both know, comes to me the other day and he’s like, “Did you see the market?” And I’m like, “No, what happened?” I don’t want to be sitting here saying what I’m doing is right, but what I’m doing is right, I don’t pay attention to the market. I don’t want to be bossy, but I’m bossy. So be like Mindy and don’t pay attention to the market. He will ask me all the time, whenever there’s a big swing, “Oh my God, did you see the market today?” I’m like, “No, what did it do?” It’s like, “It was up so much,” or, “It was down so much.” He is obsessed, kind of a little too much with where the market is and what it’s doing. I don’t care, it is what it is and me looking at it is not going to change the direction of the market.

Mindy:
Jim, here’s a little bit of trivia for you, you probably already know it. Who owns the best portfolios? The best performing portfolios?

Scott:
Over the very, very long term?

Jim:
Oh, I think you’re referring to dead people, right?

Scott:
That’ right.

Mindy:
Dead people. People who don’t touch their portfolios have the best returns because they set it and forget it. Jim, when was the last time outside of this, I read your article, so outside of this selling, because you might buy a house and taking your bonds and doing that, when was the last time you sold like a significant portion, not the whole I’m living on that stuff?

Jim:
Oh, never.

Mindy:
Oh, Jim Collins, the master of the stock markets says he never sells anything ever. Do you have a positive or negative net worth, Jim?

Jim:
So far, it's positive. Let's hope with the coronavirus sticks, but to go further though, Mindy, I want to say that I agree with your approach of ignoring the market, and I characterize it, and I have in the past, that's a superpower. So I put it usually in context, I didn't realize that that was your approach, but my daughter, who is the sole reason I wrote the blog or the book or any of that stuff is, has zero interest in this stuff other than she recognizes it's important and she needs to get a couple of things right. And that lack of interest means that she's not going to be paying attention to the market.

Jim:
That means she’s not going to be freaked out when it goes down. That means she’s not going to be tempted into doing something stupid like panic selling or tinkering with it. And that’s a super power. She will do better than the vast majority of my readers. I have readers who are like you and who are like my daughter, Jessica, and I have readers who read my stuff because they’re just really into the market and they’re forever saying, “What if you did this? What if we did this? What if we adjusted here?” And those are the people who can’t resist tinkering and I can almost guarantee that you and Jessica will outperform them over time through your benign neglect.

Scott:
I love it. All right, hope you’re enjoying the show. We’ll be right back after a word from today’s shows sponsors.

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Scott:
I’m getting a lot of questions right now from people who are looking at the market and they are well prepared. They do have a reserve, they’ve been saving up, they’ve been worried about a recession and now that market drop has come, has dropped 25% in two or three weeks, and they’re wondering, “Should I buy airline stocks?” Which had been particularly hit hard “Should I buy cruise lines?” which one of the cruise lines is down 80%. “Should I buy events businesses now that events are being canceled?” Those people are wondering, “Can I take some of my excess cash and invest it appropriately? What’s the advice for someone in that situation?

Jim:
Well, first of all, I’m not a stock picker, and I believe that stock picking is a substandard way to approach your investments overall. Now, I say that by the way, as somebody who achieved financial independence, picking individual stocks and picking actively managed funds that were run by people picking stocks. So to be clear, it doesn’t mean that you can’t make money doing it, it just means that you’re going to spend a whole lot more time and effort, and probably not do as well as the index. The research is categorically shows that the index outperforms topic. Now, having said that, I would say if you have extra money, now, I would be putting it into the market, but I’d be in those broad-based index ones that we talked about and they will include the cruise ships and the airlines and all those others. But if somebody can resist picking stocks, then picking deeply out of favor categories when as saying goes, blood is in the street, there are worse things to do.

Scott:
I recently got this question from somebody and my answer was, let’s say you have $10,000 excess cash sitting around and you’ve been waiting for this moment, you’re ready to play it, put 8,500 of it into an index fund, you can put it in all at once today, you can dollar cost average it put in a couple of hundred bucks every day for the next month if you’re worried. And then take the last 1,500 bucks and go have fun. It’s gambling, you’re at the casino, that’s what will keep you interested, enjoy. What do you think about that? Am I wrong with that or?

Jim:
I disagree entirely.

Scott:
All right, perfect.

Jim:
I’ve always cringed to this idea that you just described, which is basically put the bulk of your money in good investments, index funds and then take some to play with. Investing is not play money, at least not my world. I mean, investing is serious money, so I don’t play with any of my investment money. If I want to play then I have money for recreation and what have you, I’m not a gambler, but if I was so inclined and want to take some money and go to Las Vegas and blow it, which I have done, that’s fine, but in terms of, your investment should be your investments and you shouldn’t look for entertainment and fun from your investments,. You should look for wealth building investments, you should look for your entertainment fun elsewhere.

Scott:
I like your advice better than mine.

Mindy:
So I want to answer-

Jim:
Most people will follow yours though, Scott,

Mindy:
I want to answer your question, Scott, and say, yes, you should invest in the cruise ships and the airplanes and all of that, and you do that by buying an index fund. You take all that money and you put it in the index fund, but Jim said it before I could say it.

Jim:
Yeah. I mean, you get the advantage of all those things.

Mindy:
Okay. So on that same line because I have also been getting lots of emails, I’m seeing people that are freaking out, like Scott just said, “My accounts are down and I was planning on retiring next year or in two years, what do I do?” I would say, stay the course, but what does Jim say?

Jim:
Well, I would say the same thing, I’d say stay the course. It’s interesting the posts that I put on most recently about taking advantage of the bear, which was actually a simple little post just about this particular tax move that the declining market afforded me, but in the comments there, there’s a variety. There’s people who get it and who obviously have paid attention to my writings in the past, and then there are other people who are, “Well, the market’s declining and I think it’s going to go down further, so should I cash out now and save my principal?” Well, first of all, you have no clue as to whether the market’s going to go down further because nobody knows what is going to do, it might, it might not, but that’s market timing.

Jim:
And these are usually comments that are prefaced, by the way with, “Jim, I’ve read all your stuff and I’m actually absolutely on board [crosstalk 00:37:22]right one, but the market’s going down. I think it’s going to go down further.” You either haven’t read my stuff, you haven’t understood it or whatever. So that’s market timing, and if you really think the market’s going down further, and then yes, obviously you should sell all your stuff. If I was convinced that the market was going down further from now, that’s obviously I would sell all my stuff. And then if I was convinced I knew when it was finally hitting the bottom, I would put all my money back in.

Mindy:
Oh, tell me when it’s hitting the bottom.

Jim:
Well, my problem is I can’t do that and the other problem is nobody can do that. Now, the question becomes, how do I know that nobody on the planet can do that? I mean, how does Jim Collins know that all of the people, all the seven plus billion views and all those people that nobody can time the market the way just described? Here’s how, because anybody who had that ability, it would be 10 times or more richer than Warren buffet and far more lionized, name that person for me. There would be no power investing power, more powerful than actually being able to time market, not the phony claims that you see on all the TV shows of people who tell you they can do it. If somebody who could actually do that, they rapidly own all the money in the world.

Scott:
There’s a real piece of work on my Facebook feed who claims that he saw this coming in the early part of the Coronavirus thing, and if you’re just listening to me and sold all of your good possession, that person, that trumpeter of that, there’s always one of them at every crash and they’re always paired in a crash. That’s a few months, a few quarters or 12 days to 18 months is my favorite timeline. The crash was always 12 days to 18 months away according to the pundits, no matter what time of the market that you’re in. And you’re right, nobody can time the market there.

Jim:
You know, Scott, if I can jump in on that there, in going back to 1987 which we talked about earlier in the interview, there was a woman, and that crash in ’87 happened in October as I recall. And there was a woman by the name of Elaine Garzarelli, who was a stock analyst on Wall Street, young woman and she predicted the crash almost to the day, like in August, and she was lionized for that. I mean, and it was documented, she was on record as having said this, so it was verifiable that she wasn’t doing it after the fact like some people try to do. And she was lionized and she rapidly had her own firm and she could never repeat the performance because she got lucky.

Jim:
What people need to understand is that at any given time, there’s so many people in the stock market, in Wall Street and they are predicting anything the market can possibly do. Somebody is predicting it, and therefore, somebody and maybe a collection of somebody is going to be right. Does that mean they have predictive powers? No. That just means if there’s somebody predicting everything, somebody has to be right. It’s like a lottery, when you see somebody win power ball, you don’t sit back and say, “Wow, Scott won power ball, he must know how to pick winning lottery numbers.” No, you recognize the reality, Scott won the Powerball, he just got really lucky. That’s all it is, it’s luck.

Jim:
It’s not seeing the future. Show me the person who can do it repeatedly and now I’ll pay attention and unfortunately, for Elaine, she got lucky one time and couldn’t do it repeatedly.

Mindy:
Okay. I predict on Monday the market is going to go up and I predict that Monday the market is going to go down. One of those is going to be right.

Jim:
No. It’s possible, both could be wrong. It could flat, it could just be flat on Monday.

Mindy:
Oh my goodness. Okay, I predict the market is going to be flat on Monday. Boom, I covered all my bases.

Scott:
Well, Jim, I got a question for you-

Jim:
We have three of us, we could each take one of those predictions. One of us will be right and then we could say, “See, see, this JL Collins guy, he don’t know what he’s talking about. It’s not that hard to predict the market, I did it on Friday.”

Scott:
I got a question for you. Our audience, people listening to the show, I think are typically in their 20s, 30s and 40s, and they’re either working towards early retirement, maybe a couple of them have crossed the hurdle and are early retiree, but I think most people are still working towards that and for the long run. But suppose that you’re in your late 50s or early 60s, you’ve got a billion dollars in the portfolio and you’re planning to retire in a couple of years, but now the market’s hit and you’re worried you’re going to lose your job, and the market’s down 25%. How should that person be thinking about their overall financial position and navigating the challenges that may come with the recession, with the market going forward?

Jim:
Well, first of all, let’s take your first group first and talk about them and then we’ll talk about the second group. For those younger people out there who are still working, still building their wealth, this drop and any drop is a gift because if you’re following my plan, my path, basically you have a high savings rate and you are putting as much as you can whenever you can into a broad-based stock index fund like VTSAX. Market drops are your friend because that amount of money you put in every week or every month or whatever is now buying more shares. The best thing that can happen to you is you’re accumulating your wealth, is for the market to take a nice big plunge and stay down for a long time so you can buy those shares at a discount because that cashflow from your income is what smooths out the ride and allows you to take advantage or Mr. Market when he goes down.

Jim:
Now, for that older person you were talking about, and that by the way includes me, when you don’t have earned income anymore, then you need something else to smooth the ride and that’s something else is bonds. So you don’t protect yourself from market volatility by trying to figure out how to time it, which so many people seem to think they need to do, you protect it either having that cashflow from your earned income or by your allocation, which includes bonds. And then when the market drops and your stock value of your stocks go down, the percentage they represent will also go down and you’ll be shifting money from the bonds to bring it back up to your set allocation, and that’s how you take advantage of it. then

Jim:
In terms of somebody’s worried about losing their job, that’s a whole different question. So if you’re worried about losing your job and you’re near retirement, you should be more conservative with your investing, you probably should be adding those bonds now. If you feel very secure in your job until the moment you retire, then I was 100% personally, 100% stocks until the moment I pulled the trigger and quit my job, and only then did I add bonds. But again, that’s a matter of personal preference too, I’m pretty high-risk tolerance. A lot of people, even if they’re secure in their jobs, say “I want to begin transitioning to bonds five years out or whatever,” and that’s fine.

Scott:
Fantastic response. Thank you.

Mindy:
Yeah. I was going to ask you to explain bonds, but then you just did, so never mind that. I am not super excited about bonds because they don’t have an aggressive growth rate typically. They have a non-aggressive lose money rate, which is really nice on a day like Thursday, but again, I can’t time the market. I would love to know when the market’s going to crash, so if anybody wants to pull that 1987 lady and tell me when the market’s going to crash and guarantee it, you got to guarantee it, I would like to pull my money out the day before and then buy it back again the next day.

Jim:
If anybody steps forward and tells you that they could do that for you, Mindy, I would shut down the microphone and close my ears.

Mindy:
Yeah. you know what, I’m just not selling and I’m also not paying attention to it, and maybe if you’re freaking out about the stock market, maybe you just close up the browsers and look at things that aren’t talking about the stock market. Look at Pinterest, Pinterest will give you lots of great recipes and funny things that you don’t have to worry about stock market, not a lot of stock market conversation on Pinterest, which is nice. Before we get too far away from talking about the market and quoting Jim, the market always goes up eventually, I would like to point out there’s a website, it’s macrotrends.net I will include a link to this particular chart in our show notes.

Mindy:
It’s a really helpful chart to see the historical annual data on the stock market. There are 105 years, and I was thinking about this, do you know when the stock markets started? Because this chart starts in 1915.

Jim:
Well, the very first stock market was in the Netherlands, in Holland in like the 1500s.They were very small, but if you’re talking about the Dow. If you’re talking about the Dow Jones Industrial Average, I want to say it was 1890s something, there were 18 stocks that began. I actually talk about that in one of the early posts in the Stock Series, where I actually have the actual numbers, but yeah, we’ve got a pretty long history of it.

Mindy:
We have a long-recorded history of it starting in 1915 on this link that I will share in the show notes. In 1915, the stock market closed up 81%. It started off at 74% and went to 99%, percentage wise, that was great, that’s like $25, but in 1915 that’s a lot. But if you scroll through this, I was writing an article for the BiggerPockets blog and I was scrolling through this and like a positive year is a green number and a negative year is a red number, and I’m scrolling through, I’m like, “There’s a lot of green. Oh there’s a red, lots of green, a red, lots of green, a red.” There’s a lot of up years and only a few down years.

Mindy:
And I looked, in 105 years, there’s 35 down years, and a lot of those years are single digit downs, like 2015 was down 2.2%. There’s bigger down years, I don’t want to-

Jim:
Well, on average, the market goes down one out of every four years, so 25% of the time roughly. And that of course means 75% of the time is going up, so the winning bet is that it’s going to go up. And there’s lots of reasons for that, the least of which is that the market is not little bits of paper, little bits of data that are traded, although it is that, well, when you own the Total Stock Market Index Fund, you own a piece of every publicly traded company in United States. You own the economic power of the United States, and everybody in those companies from the factory floor to the CEO is working to make you richer and to beat the competition. And you don’t have to worry about which ones are going to fail, some of them will because you own them all.

Jim:
And the ones that fail just fall off the index and the most they can possibly lose is 100%, the ones that succeed, there’s no limit to how high they can go. So it is a winning formula if the index funds that we describe or what I had termed that I’m very proud of that, I coined our self-cleansing, because the losers fall off, the new companies that gets started and build up and are good at it, and the companies that succeed are left to run as far as they can possibly run.

Mindy:
You know, Jim, I really can’t top that. I can’t top that at all.

Jim:
I’m thinking about a couple of different last things that are points that I want to make, if you’ll indulge me.

Mindy:
Of course.

Jim:
One, we’ve talked a couple of times about my now somewhat famous line that the market always goes up and that of everything I’ve written, I think that’s gotten the most pushback, and I’ve had people say things like, “Well, at some point, the sun’s going to expand into a red giant and then engulf the earth and burn it to a cinder. How will the market do that?” And well, yeah, then the market’s not going to recover. You have to understand, when I say the market’s always going to go up, contingent on the United States continuing as a viable economic country. And if something were to happen that derailed that, then yes, the market’s not going to recover.

Jim:
So let’s take a look at the Coronavirus as an example. The only thing, the only way that the market’s not going to go up at some point after this has run its course, is if in fact the Coronavirus turns out to be the next plague, the next black death, and kills 60% of humanity. Now, if you think that’s going to happen, then invest, the market’s not going to recover from that. It’s not going to go back up again, and you shouldn’t be investing in the market now. I for one can’t think of any investment. Your house isn’t going to be worth anything then, your investment properties aren’t going to be worth anything, nobody’s going to care about gold.

Scott:
Toilet paper.

Jim:
Yeah. Toilet paper.

Mindy:
I was going to say toilet paper.

Jim:
Yeah. Guns and ammunition. And I know people, I have friends by the way, who believe that civilization is going to end and they are out building off the grid houses in remote areas. And so if that’s your belief system, you certainly don’t want to follow the path that I outlined, but if you don’t believe that, if you believe that the US is going to continue as a viable country, a viable economy, then the market will always go up. If you believe that this disease, this Coronavirus will be solved and controlled at some point, then the market will go back up. And I think before we scare anybody with my black death analogy, it’s important to realize that back in 13, 1400s, they had no concept of the germ theory of disease and they had very little concept of medical attention or even basic sanitations. So the idea that something of that nature happening are a whole lot more remote than they were back then.

Mindy:
Yeah. When did they discover you had to wash your hands between patients? Like that right there saved a lot of transmission. And that was like what? The ’20s or the ’30s? That’s very recently.

Jim:
Yeah. I don’t remember exactly, Mindy, but disturbingly recent. They used a certain, used to cut people open without bothering to clean their hands between surgeries?

Mindy:
Yeah. That’s gross.

Jim:
But just they didn’t know.

Mindy:
Yeah. You had a tweet the other day that I thought was just so brilliant and then I read your Mr. Bear thing and I realized that it was straight from the article, but you said, this time is different, this market crash is different and you’re like, “Nope, every market crash feels like this time is different and someday if it truly is, then nothing will matter.” And that’s so true. This market crash is not any different, just like you said it. Well, I mean, it might be, like maybe in all the rest of the countries, the COVID-19 mortality rate is between two to 4%-ish, which is what they are currently quoting. But maybe in America, it’s going to be 80%, probably not. What are the odds that every other country in the world is going to be more immune than America is?

Jim:
Well, and if it is 80%, then it won’t matter whether you’re invested in stocks or not invested in stocks. The other thing-

Scott:
Or you have a very good performing portfolio because you’ll be dead.

Jim:
Yeah. The other illustration I use is, you guys, and most of your listeners are way too young to remember this other than history books, but I’m old enough that I was alive, I was very young, but I was alive in 1963 during the Cuban Missile Crisis. And that’s when we came right to the brink of all out nuclear war, the US and the Soviet Union hurdling nuclear missiles at each other. That certainly would have been the end of both those countries. There’s an argument with the fallout, it would have been the end of civilizations across the planet. What a wonderful time to buy stocks because if the nuclear war happened, it doesn’t matter. If the nuclear war doesn’t happen, and of course we know from history it didn’t, then you have this incredible growth of stocks from 1963 until now

Jim:
I mean, just incredible wealth created over that period of time. So it’s the same thing now, if the Coronavirus kills 80% of us, it doesn’t matter what you’re invested in. If it doesn’t, then stocks are going to continue to do very well.

Mindy:
And a great time to buy.

Jim:
And what a great time to buy. And 20 years from now, it’ll be worth far more than it is today.

Scott:
I love the way your mind works on this stuff.

Jim:
Not everybody agrees with you, Scott.

Mindy:
What are you talking about, Scott? I love the way your mind works, don’t ever sell. Now, I know Jim to be a very, very intelligent man, but that is not one of those, “Oh, it took me a lot of time to come up with this idea, don’t sell, the end.”

Scott:
But the arguments, the amount of arguments and push backs and the models that you’ve developed, Jim, to combat all of those arguments against it, I think is what really makes you such a special contributor to the financial independence community, and with your book, The Simple Path to Wealth. That’s what I think is really unique about you and your perspective and why we’re so grateful to have you on the show today, here in this time when everyone’s freaking out about the market.

Jim:
Well, the other advantage that I have, Scott, is that if I’m wrong, we’ll all be dead and nobody could hold me to account.

Scott:
There you go.

Jim:
And if we’re not all dead, then I will have been right.

Mindy:
Frankly, I think all these people that are arguing with you just want to argue with you on the off chance that they can prove you wrong, “I proved Jim wrong.” Jim doesn’t care.

Jim:
No. I mean, I kind of don’t.

Mindy:
If you want to go ahead and prove him wrong, you’re not going to, because he’s not wrong. I’ve got-

Jim:
Mindy, along those same lines, I used to and I got so many of these, I finally put it in the disclaimers of how I feel about it but, “Here’s the link to this article and written by so and so, and this person disagrees with you, tell me why you’re right and they are wrong.” Well, no, I’m not going to do that. I can spend my time doing that. I’ve written a book and I’ve written a blog, and in those two things, I’ve expressed my ideas as clearly as I know how, and I presume that this person whose article you linked to has done the same. Presumably, they have expressed their ideas as clearly as they know how. You can read both and you decide, I don’t care. I mean, it doesn’t make any difference to me if you think that person’s ideas are better than mine, then go for it. I’ve only ever tried to convince one person and that’s my daughter, and finally I succeeded and so my mission’s done.

Jim:
And if anybody else think what I have to say is worthwhile and they want to come along for the ride and it enriches them, then I think that’s wonderful and I’m delighted by it. But for those who don’t, I mean, Godspeed, I don’t care. Go do whatever you want to do. If you want to keep buying individual stocks, then buy individual stocks, it just makes a better market. In fact, the fewer people who follow my path, the better off I am personally. So if you want to go pick individual stocks, if you want to sell your stocks in a panic and drive the market down so I can buy it cheaper, you go for it. It’s all right with me.

Mindy:
Okay. So Jim says you should stay the course, but if you don’t want to, do what you want.

Jim:
Yeah, do what you want. You do you. You do you.

Mindy:
You do you, there you go. You do you with Jim Collins from JL Collins and H. Okay. Jim, we have a segment at the end of every show called the famous four, but it really doesn’t apply because we’ve already heard your personal story where we ask your favorite book and all of those things. So we’re going to switch it up just a bit and say what is your best piece of advice for people who are just starting out investing?

Jim:
Oh, I mean, I think it’s the same all the time, you want to spend less than you make and use that surplus to pay off debt if you have debt, and get rid of the debt. And if you don’t have debt or once the debt’s gone, then use that surplus to invest. And my favorite investment vehicle is VTSAX or VTI through Vanguard and put as much as you can in it, whenever you can. Don’t try to time it. Don’t try to say, “I’m going to wait till it’s lower.” Just put as much in as you can whenever you can and keep doing it over time and you’ll take advantage of the drops when they happen and you’ll be there for the rises that happens there.

Jim:
Kristy Shen of Millennial Revolution has a great line that I’m probably not going to quote exactly, but it’s something effective, “It’s never a good time to buy stocks. Either they’re too expensive because the market’s going down or the market’s dropping in and they’re losing value, so there’s never an ideal time to buy stocks.” Before this crash, people were, “No, I can’t buy now because it’s going up and now I can’t buy because it’s going down,” and nobody knows just like nobody knew how high it was going to go before, nobody knows how low it’s going to go. So you just keep buying, don’t pay attention, just keep buying. Be like Mindy-

Mindy:
Be like Mindy.

Jim:
… Don’t pay attention to it, ignore it.

Mindy:
Ignore it. Yes.

Jim:
Other than putting the money in. And then stay they invested forever and just draw up a little bit you need when the time comes to live on it. Job done.

Scott:
Love it. Well, I know we can find this as well on the show notes for episode 20 at biggerpockets.com/moneyshow20. But where can people find out more about you? Let’s hear that one more time for people who are listening to this episode.

Jim:
Well, I’m on Twitter and I’m on Facebook, but the big one is the blog of course, which is JLCollinsNH, stands for New Hampshire where I was living when I started the blog, so jlcollinsnh.com.

Scott:
Love it. And you can also find his book, The Simple Path To Wealth on Amazon, and that’s constantly quoted as one of the favorite books by guests on the BiggerPockets Money shows. So I’m sure you’ve heard that mentioned if you listen to a variety of episodes, but one of the premier, one of the key books to read in the financial independence spheres. So definitely check that out if you haven’t yet. A free plug for you.

Jim:
I appreciate that. And I’m delighted to hear that it gets such positive comment from your listeners.

Scott:
Yeah. And there’s a foreword from the one and only Mr. Money Mustache as well, I believe. Right?

Jim:
Yeah, absolutely. Absolutely. And he did a great job on it. I love the foreword he wrote.

Mindy:
Okay. Jim, thank you so much for taking the time today to share your groundbreaking advice of, “Don’t sell unless you want to.”

Jim:
[crosstalk 01:01:50]advice to do that.

Mindy:
But you know what? I think sometimes it’s really reassuring to have people hear it from somebody. Not everybody can just send you an email or call you up and be like, “Hey Jim, you want to chat for an hour about the stock market?”

Jim:
Please don’t call [crosstalk 01:02:08].

Mindy:
His phone number is…

Scott:
Jim is open to debates. Just call him and debate him. He thrives on that kind of stuff.

Mindy:
He really likes 2:00 AM phone calls, at 1-800-CALLMEANYTIMEDOTCOM.

Jim:
Because usually, at 2:00 AM, I’m up worried about the stock market.

Mindy:
Yeah. Where can I get more money to throw at it? It’s dropping. Okay. But no, I really do appreciate this. I really think that a lot of people are going to send us emails and you too, saying, “You know what, it was so helpful to hear this.”

Jim:
Well, good. And I’m honored that you would ask. It’s always fun hanging out with you guys and kicking these things around. I always have a good time, so thank you.

Mindy:
Well, great. Okay, well, thank you so much and have a lovely day and we’ll talk to you soon. Hopefully, we’ll talk to you in like six months when the stock market is just crashing through the roof. I’m sorry, going through the roof, so it’s so high, not crashing. I guess that’s the wrong word. Okay. We’ll talk to you later, Jim. Bye-bye.

Jim:
Bye-bye.

Mindy:
Okay, Scott, that was Jim Collins from JL Collins NH, the author of The Simple Path To Wealth. What did you think of today’s show?

Scott:
I’m glad we brought him on there instead of us talking about it because he had much better advice than even what you or I have, even though it’s very similar. We’re all doing the same thing all three of us, we’re staying the course, we’re not selling any of our investments, and we’re continuing to put our excess cash into the stock market. Magic. Crazy formula there. And again, we’re protected because we’ve made long term good, neat, smart financial decisions of spending less than we earn, building up a reserve that’s appropriate relative to our financial positions. I loved his thought process on how you need less of that as your financial position accelerates and just continuing to do what we’ve always done because it’s recession proof and thinking over the very longterm anyways.

Mindy:
Well, and over the very long term I think is a really great point. I am not in the stock market so that I can cash out tomorrow. I am older than you, but I’m not 65 so I don’t want to take my stocks out until I need them. I have a job that pays my living expenses right now, I don’t need to access my stock market funds so when the market goes down, I just regret that I don’t have more cash on hand to throw into the market at that time.

Scott:
Yeah, I agree completely. And we talked about what happens if you are closer to 65, and that’s why you move your allocation more towards bonds as you get closer to traditional retirement age. Let’s talk quickly about real estate, however, because I know a lot of the folks that listen to the BiggerPockets Money podcast also own rental properties. And when I think about rental properties, I try to apply exactly the same philosophy we just discussed today to my rental property investments.

Scott:
I am investing for the long term. I believe that over a very long period of time, my rental properties are going to appreciate in value and my cashflow is going to grow as rents rise with inflation. Expenses obviously also increase in inflation, but mathematically that translates to greater and greater cashflow growth over the very long term as well. The difference with rental properties and stocks in this context, maybe it isn't even a difference, but one of the potential problems that an investor will run into is, you've got capital expenditures and you've got vacancies to deal with and potentially reductions and rents.

Scott:
So the problem, the fear that I know a lot of real estate investors will have if we are in fact entering recession, we may look silly if this isn't even a recession and it bounces back, or we'll look like geniuses, one of those two. But the fear that an investor has in that environment is, "Hey, is my cashflow going to evaporate? And what am I going to do to sustain this property?" And that is why when we invest in real estate, we invest with a reserve. When you buy your first property, I always say the same thing, bring your down payment, bring your closing costs, bring expected repairs, and bring 10 to $15,000 in cash reserve that you're going to set aside or more if you're buying a much larger property that's larger than the average.

Scott:
But bring in appropriate reserve and consider that part of your investments. And for me, I only take cash out of my rental portfolio if I’m dumping money into my bank account that’s an excess of that reserve. So let’s say my reserve it needs to be $35,000 across my portfolio. When I have $36,000 in my account because of my cashflow, that’s when I’ll begin taking a distribution. Makes sense?

Mindy:
Yeah.

Scott:
And that allows me to stay in the market forever. I never have to sell. I can sell, I can refinance, I can buy more, but I am trying to apply the exact same long longterm philosophy. And just like Jim said, if this virus kills off so much of the population that there’s a panic, an oversupply and under demand of the population, we’ve all got bigger fish to fry and you shouldn’t be in real estate if you’re afraid of that reality. But in most, I’ll use the word reasonable scenarios that we can come up with, I believe that my approach longterm to investing in real estate in parallel with my index fund investments, will be as strong that and I’m going to capitalize appropriately for that.

Mindy:
You know, Scott, I’ve said this a bunch before and I’m going to say it again. The whole reason we started this podcast is because the number one question that we would get in the forums is, “How do I start investing in real estate with no money and bad credit?” And the answer is, you don’t, let’s fix your no money in bad credit situation. So if you have no money, you should also not be in the real estate market at this time. You can be learning, you can be saving. If you’ve got debt, you should be paying that off. Or as we heard on Craig Curelop’s episode 35, you can use that to your advantage by saving and then investing and using that to pay it off. Craig says it way better, listen to his episode if you haven’t yet.

Mindy:
But, if you don’t have a healthy reserve account, you should not be purchasing properties where you are providing housing for other people. That said, there are times that you’ll have to dip into your reserve and that’s fine, that’s what it is there for, but you need to have a healthy reserve. I love Brandon Turner, but I don’t agree with him with his whole, How To Buy Real Estate With No Money. Well, it maybe it’s none of your money, but you need to have something that you can pull from. Right now, COVID is an issue, they’re closing schools, they’re closing locally, they’ve closed the rec center and the library and all these things. They closed the NBA, they closed Mount Everest.

Mindy:
All these things are going to have ripple effects. What happens if your otherwise great tenant loses their job? They work at the NBA arena near you, and now they can’t pay their bills because they’re not getting paid. Are you going to kick them out? Who’s going to come and live there?

Scott:
Yeah. I think with this, Mindy and I are extremely passionate about helping you guys succeed financially over the long term. And we hope that through this show, that you’ve learned some great habits and great ways to deal with money. And if you’re new to this show, maybe you’re starting off in a little bit tougher of a position. If you have worries, find us on the Facebook Group, at BiggerPockets Money. Reach out to us on BiggerPockets. Email us. We are here to help. I want to make sure that if this is a recession, if this is a painful problem for people, that we are personally privately as individuals, there to help you if you have questions or that the group is there for you, the Facebook Group, BiggerPockets forums.

Scott:
This is where we want to be helpful and where we want to be useful. It’s all free. We want you to succeed and have a successful financial outcome. Stay the course, continue that journey to financial freedom. So please use all the resources we have and know that if you’re starting out now in a rough position and we do go into recession, you’re going to be in for a slog, but we’re still there to help, even if that’s the case.

Mindy:
Yeah, and like you said, Scott, you said on the Facebook Group, that’s filled with almost 3,000 people who are doing it just like you. They have questions, they have answers to your questions. They’ve been there before and can tell you what worked for them, or they can even just say, “Hey, I hear you, and I’m sorry you’re going through this.” It’s filled with people who are on the same journey in various different spaces and it’s really been a great group so far. In the show notes today, which is biggerpockets.com/moneyshow116, there’s links to my email, [email protected], and Scott’s email, [email protected], the Facebook Group, all the things we talked about on this show today with Jim.

Mindy:
We did make light of the situation, “Oh, just don’t sell.” But I can say that because I’ve been through several crashes. This is Scott’s first crash and he’s still saying stay the course. And if it was worth it to you to buy the thing at X dollars three weeks ago, it should be even more worth it to you to buy it now at its current lower price. So individual stocks, index funds are the preferred method for almost everybody we’ve ever talked to. But even rental properties, I’ve had lots of people sending me notes, “Hey, is now a good time to buy?” Well, what is your local market look like?

Mindy:
We’re in Denver. Denver is a pretty hot market. Denver has been on a tear for what? 10 years, Scott?

Scott:
Yup.

Mindy:
If I had an opportunity to buy a property that was a good deal three weeks ago, I would continue to go through the process and close on the property because it’s going to be a good deal to me. Is the value going to go down? I don’t know. I don’t have a crystal ball and I can’t tell, but in our market it’s so hot, I can’t imagine that it would stay down for a long time.

Scott:
That’s right. Is now a good time to buy? Is now a good time to sell? Now is a great time to consistently but not to aggressively work towards your longterm investing and financial goals. Now is a great time to not spend more than you earn, to continue to keep control of your budget, and to continue to work very hard at your job, and continue to pile up that cash and invest it appropriately in index funds, real estate or whatever it is that you decide to invest it in.

Mindy:
And now is a great time to end because I cannot top that at all.

Scott:
All right. Should we get out of here?

Mindy:
We should. From episode 116 of the BiggerPockets Money Podcast. He is Scott Trench and I am Mindy Jensen, and we are encouraging you to stay the course.

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In This Episode We Cover:

  • How to not freak out about the current market crash
  • How to handle this market drop if you risk losing your job
  • When to prepare an emergency fund and how much to put into it
  • Why you should hold your portfolio “forever”
  • What an index fund is
  • Why it is important to “ignore” the market
  • How index investors outperform stock pickers
  • How one can never time the market
  • Why some correct predictions can be explained by luck
  • And SO much more!

Links from the Show

Books Mentioned in this Show:

Tweetable Topic:

  • “People freak out whenever the market does something unexpected, whenever it drops.” (Tweet This!)
  • “Investing is not play money; investing is serious money.” (Tweet This!)
  • “This drop or any drop is a gift.” (Tweet This!)
  • “There’s no ideal time to buy stocks.” (Tweet This!)

Connect with Jim:

The BiggerPockets Money Podcast is for anyone who has money… or want to have more! Join BiggerPockets Community Manager and Podcast Director Mindy Jensen and CEO Scott Trench weekly for the BiggerP...
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    Michael Sockwell from Acworth, Georgia
    Replied 28 days ago
    Never invested in the market outside of my company 401K. Can anyone provide info on how to start, also how and where can I buy VTSAX Online specifically Thanks