May 4, 2020

Investing during a recession can be complicated. That’s why this video is called “The Good, The Bad and The Ugly of Investing $100K during the recession. 

Now, let’s talk about the good first. Stocks are cheap. You know it because some stocks are down 40%, 50%, even 80% when the business itself is very strong. In this video, I cover 4 industries that are super cheap during the coronavirus crash. I also cover 2 industries that are not so cheap during the crash. In Investing Accelerator, we go in-depth onto which stocks are good opportunities during our weekly coaching call. 

How about the Bad? It takes time to earn a good return from the market. Some people like my students can make 100% in 1 month. But some students will take more time. It’s okay to take some time to make money. The stock market will fluctuate but as long as you are able to get in at a deep discount. So give yourself some time to make money, okay? In Investing Accelerator, we cover when to enter into a stock (so you get the best possible price) and when to get out of the stock (so you keep the most in your bank).

Finally, the ugly. In this video, I cover the #1 thing you must be aware of when it comes to investing long term during a recession. If you ignore this one ugly thing, your portfolio might turn ugly. You might lose 100% of your investment. In Investing Accelerator, we cover this idea extensively because I am a CPA and I have seen a lot of these issues behind the scenes when it comes to investing. The stock market is not a beginner friendly place where everyone is honest and playing fair… You know what I mean. This is why we cover these advanced topics in Investing Accelerator.

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90% correct transcript:

The good, the bad, and the ugly. How to invest a hundred thousand during a recession, especially right now. So before we start, I just want to celebrate another success story within investing accelerator where Adrian made 45% from flier. So F, L I R it is a thermal detection company. So during the Corona virus market crash, Adrian really made his first investment into this company because he thinks there's going to be a surgeon demand in thermal imaging technology. So if you're interested, you can check it out. Within 28 days, Adrian made 45% gain using just stocks alone, not even options. So congratulations to Adrian for making such a game and I look forward to your next one. So welcome back to my channel. And today we're going to talk about how to invest a hundred thousand dollars during a recession and the good, the bad and ugly.

So right now we're in the middle of it and let's start with the good. You know, what to look forward to because I think right now there's a lot of negative news going around. The Corona virus. It's obviously impacting a lot of us. The stock market is down and there's a lot of death going on. So let's focus on a positive first and then we can get to the bad and the ugly later. So everything is cheap. Exactly. Everything is quite cheap. You will find that most of the stocks are down 40, 50, 60, some of them are even down 80%. So this means that you as a longterm investor is a great opportunity to buy some deep value stocks. So just to focus on a couple of industries that might interest you. For example, airline is really cheap restaurants that's really cheap manufacturing that's really cheap as well.

And oil and gas coupled with the Corona virus, it's extremely cheap and last week was actually a week that oil futures was negative for the first time in history. So that shocked a lot of people. So that is really the good thing about investing during a recession is that a lot of stocks are cheap. So then instead of trying to find a discount, a stock, there are way too many stocks for you to choose from. And now you need to focus. Now there are some industries that are not cheap. For example, biomedical stocks during this time is not cheap at all. E-Commerce or essential retail is not cheap. For example, like Costco or Amazon or Alibaba, these are not cheap. They're not a discount. But they do have quite a bit of growth potential. And for something like Netflix, you know, obviously it went up quite a bit and that is not cheap as well.

So that is really the good, the good is the opportunity to good is the volume of stock start on a that you can take advantage today if you know what to look for. Now let's talk about the bad because as a longterm investor, you always need to understand the risk and that was probably the first thing you need to look at before you even invest in any opportunity at all. Now the first thing is the recovery will take some time. Now obviously from time to time you get some bad news in the market, but the recovery for disc Corona virus plus oil price crash will take a little bit longer than usual. Now you might have heard, you know, some students in my program or even other YouTube videos out there that some people have already made a hundred percent within a month or made 30% within a couple of months and there will always be those exceptions.

Now what's important is to focus on, you know, the general public. Now most people are not going to make a hundred percent in one month is fine, but then because the stocks has gone down so much, that's you should aim for a higher game. Now the average return for S and P 500 is 7% and now because the stocks are so cheap, like 60 70 80 90% discount, you can actually aim for a higher gain within the next two, three years. Now the stock will fluctuate more and it is fallen tile and that's okay as long as you know you are getting in the stock at a discount. So you want to allocate your 100,000 very carefully. Now in terms of time it takes to recover, I mentioned this earlier, it will take some time now for some stocks is going to look like a fee shape recovery.

For example, biomedical stocks is like a fee shape recovery because there's really no reason for it to go down. For Amazon, for Netflix they have like a fee shape as well, but for other stocks like airlines, restaurants, manufacturing, they're going to take a little bit longer and you should be okay with that because you're a longterm investor. Now, whether that is three months, six months, a year, or even two years, you should be mentally prepared for it. So once you invest or once you are fully invest, you are not like sitting in front of the computer worrying about the market every day because you know you took advantage of the stock market when it is cheap during this time. So that is really the bad is that it will take some time to recover, but so is everything else in life. Now finally the ugly.

Now, the biggest problem that I see when it comes to investing during a recession is really the risk of bankruptcy. Now, a lot of people are thinking that, well, yeah, there's always a risk of bankruptcy, but the risk of bankruptcy is especially high during a recession because the banks are making it harder to get a loan. And if you have a bad credit or if you as a company have a bad history, poor cash flow, you're not really getting a loan. It's hard to get a loan. And if you get a loan to interest is going to be high. So when you think about it, the risk of bankruptcy is going to be high, especially some of the businesses are forced to be shut down. And if they are not prepared and they have a lot of leverage, then that will push them towards the edge of bankruptcy.

And I do have another video on how to invest a hundred K on what you need to pay attention to. And I also talk about some of that risk on how to not lose money. So you can check out that video as well. But essentially you need to consider the fact that you might lose a hundred percent of your investment when you're investing during a recession. And the reason is because the risk of bankruptcy is high. If you don't know how to separate a good lemon from a bad lemon. That's probably the best analogy I have. Another analogy I have is imagine you're going to a used car lot and now you have a bunch of used cars and you can tell whether a car is actually used or it has been tempered. So then the mileage is lower than expected. So you need to separate between a good lemon for a bad lemon.

And that's really where your research comes in. And if you want to learn more about research, then remember to click like and subscribe and you'll get more videos on that. And if you invest in something that has a downtrend, it's going to turn really ugly because you might not ever recover your money. And what is a downtrend at downtrend means the longer y'all hold onto that stock, the more money you lose. That's pretty much what a downtrend is. So you don't need to make it too complicated because I just simplified that for you. So that is really the ugly part of investing and that's when a lot of people complain about losing money in the markets is because they don't consider the risks properly. So that's it for this video. My name is Eric CDOT and my mission is really to help people like yourself to master investing and target 30% a year.

So then you make a higher return, retire faster, you're a happier person, travel more. You get the idea. So if you want to join me on this journey so then you can become better at investing, click the like button, subscribe and leave me a comment below and let me know what's your biggest struggle when it comes to investing? Are you taking advantage of this recession? Are you buying into some discount stocks? If you are, then you should have a fairly positive and optimistic future coming ahead for the next two, three years. Now in terms of the next video, right now I'm thinking on doing one that is about income. So how to invest a hundred K for income. So I got a couple of ideas down and if that's something you want to see, then please subscribe, like comment below and let me know if there's another topic you want me to make. You can leave a comment below as well. I'll see you in the next video. So thank you for watching and I hope you enjoyed the video. Please help support me by like subscribe and you can watch the next recommended video here as well. So I'll see you next one.

About the author 

Eric Seto

Investor, CPA (Canada) based in Hong Kong and Vancouver

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