Welcome back. In this episode, we're going to talk about how to not lose money during
market crashes. Because it's not a matter of if the market is going to crash. it's WHEN.
And we just go through this in life. You're going to see how I protect myself when the
market goes down, I almost like cheer! I mean, I don't really like the market to crash but
it does not affect me. It's like many of our clients who learn what you're going to learn
in this episode, you're like, "GO! GO!" Because they're not losing. And they begin to make
money the instant the market turns around where most people are taking 2, 3, 4 years
just to make back what they lost. And they say, "Well, that's the way it is." No, it
doesn't have to be that way. So, get ready, I'm going to blow you away with 5 ways to
not just survive but thrive during a market crash. I'm Doug Andrew and I've been primarily
viewed as a financial strategist, a tax minimization specialist or a retirement plan specialist
for 45 years. And a lot of people would come to me in frustration because a lot of their
hard earned savings where they put money into tax deferred IRAs and 401Ks, where usually
invested in the market. And they were told by their advisor, and frankly, when I got
my series one security's license, clear back in 1974 and '75 (when I started), in about
7 or 8 years, I ended up with over 3,000 clients in 13 western estates. And we were trying
to do a good job of making sure that they got an average rate of return. Back then we
we're trying for 12%. Now, there are advisors out there like Dave Ramsey and so forth to
say, "Hang in there, you'll earn 12% again." Well, some years, you might earn 12 or even
more than that. But you lose money and so, the average is not really 12%. Many years,
you might earn 12, 15 or 20. But then if you lose the 40% from 2001 to 2003 for example,
it takes 4-5 years to make back what you lost. And that happen again after 2008. Well, it
happens about every 7 to 10 years. We have a major down turn in the market. So, I want
you to understand ways to not worry about that because people, they just... [Sighs]
And they get so frustrated. When the markets starts to go down, their advisors goes, "Hang
in there." Because that's we were taught to say to our clients. "The market always comes
back, hang in there." Well, we have found emotionally, when the market drops 30, 35,
40 percent, people just go crazy. And they go enough already and then they sell... in
the worst time. They sell when the market is low. And then when the market turns around,
they're not sure. They don't have confidence anymore and their money sitting over in the
bank or earning 1% or less. And they wait, wait, wait until the market comeback and then
missed a lot of that gain. And they are selling low and buying high. That's why their average
return is only about 3.49%. When if you did buy and hold over a 20-year period, Dalbar
who studies investor behavior says you should earn about 9.4% if you just hang in there.
But people don't do that. They buy and sell out of emotion at the wrong times. And so,
they only averaging about 3 and a half percent. Warren Buffet had 2 rules for investing. "Don't
lose money", that's rule number 1. Rule number 2 is "Don't forget rule number 1". Will Rogers
once said, "People get more concerned about the return of their money when things are
bad or there's a crash. Instead of the return on their money." So, I'm going to give you
a little glimpse of 5 ways to not just survive but actually you can thrive during the next
market crash. I'm not a doomsday-er. But I am a realist. And I know it's just going to
happen. And the stock market is like a person with a yo-yo hopefully walking up some stairs.
But there are periods like the year 2000 to 2012, that person with the yo-yo was like
walking across the flat surface. The Dow Jones, the S&P 500 was exactly where it was 12 years
earlier. And that's why it's called the lost decade or really the last 12-year period where
if people started out with a million bucks in the year 2000 without adding a dime, many
of them saw that million go down and back up and down and back up. It was still worth
just a million at the end of 12 years. Well, with inflation, it wasn't buying the same
gallons of gas and loaves of bread and haircuts that did it bought back in the year 2000.
So, they actually lost money even though they finally ended up with what they started with
12 years earlier. So, you've got to take into consideration other things like inflation
when you're measuring this. There are many ways. But these are the top 5 that I have
helped many many students and mentees through the pat 4 and a half decades to be able to
not just survive bu thrive when the market crashes. So, in order, number 1 is to protect
yourself from market losses, yet participate with upside gains. I'll explain that. Maintain
at most liquidity. That's the access to your money when you need it with an electronic
funds transfer or phone call. Maintain safety, okay? Maintain safety of principals so you
don't lose principal. Also the safety of the institution where you have your money and
protect it from the negative impact of an inflation. And then earn predictable rates
of return which is so crucial to be able to count on a rate of return that at least averages
7, 8, 9, 10 percent. Most wealthy people are totally satisfied if they just average 6,
7 or 8 percent, especially the way I do it is totally tax-free. So, that's the last key
component is to choose tax-free vehicles because you only have to earn 10% to equal what a
15% tax-deferred IRA has to earn. Because the IRA or 401K isn't tax-free. You owe a
3rd of that. 5 of those percentage point to Uncle Sam and maybe 41 out of 50 states if
you live in one that has state income tax, you have to pay them too. So, you're only
netting 10. I only have to earn 10 to net 10 in a tax-free vehicle. So, going back to
protect yourself from market losses, my favorite strategy that is indexing. And so, when I
put my money, my serious cash aside for any type of a long-term goal, 5 years or longer
--retirement, colleagues, savings for my children, any emergency fund or thing you're trying
to establish. Maybe a start of business or buy a home or a major purchase like a grand
piano or something. What you want to do is set aside your money into an environment where
you don't lose when the market goes down. And so, that is where I use the strategy indexing.
There are other episodes that go in to detail that I want you to watch to understand what
indexing is. But in a nutshell, when the market goes down, I don't lose. I may not make very
much but I don't lose when the market goes down. The minute the market turns around and
comes back, I start making money again. And people say, "How do you do that?" Well, the
key is just not to have your money in the market. Your money or the return on your money
is linked to the market to some measuring device. It's called index, there are several
indices, the S & P 500, the top 500 companies in America. The Dow Jones, The Russell 2000.
I like the Barclays US Dynamic Balance Index. So, there's several of these and that's why
there's several educational episode that talk about how this works. But the essence is this:
When the market goes down, I don't lose money because my money is not in the market. But
when the market goes up... If the S&P went up 10%, I get 10%. If it goes up 15%, I get
15%. If it goes up 20%, I may not get 20 sometimes if they have to cap it. The reason why there's
a cap on what they'll paying me is because there's a floor. If the market dives 40% like
2008, I didn't lose anything, okay? I didn't make anything that year but I didn't lose.
The first 90 days of 2009, many people following these strategy of indexing, locked in gains
of 16% after not losing a penny. They just picked up where they left off. In 2017, many
people following the indexing strategies that we used. They locked in gains of 16%. Some
of them up to 25%. The next year, the market was flat. Sometimes depending up on the date
you measuring, people lost. Well, our clients who followed indexing, our students, they
didn't lose the 25% they made the year before. So, that's what I mean by safety of principal.
Every year that you make money, you want that to become newly protected principal. You don't
want to ever lose in the future. any money you made previously. And most advisors when
I say that go, "Huh? How do you do that?" We were taught that by broker/dealer "Just
hang in there, the market will always comeback." Well, I would just assume not lose, okay?
That's unacceptable to me. On serious cash to have it subject to the market crashes and
not be able to recover your principal. Let's just keep going on principal. So, some years,
I may not make anything but I am just constantly moving upwards instead of going down. And
up and down, and up... And it's like a ratchet ranch.When I ratchet up it's like, tightening
that bolt with the ratchet ranch. And then during the down year, I don't lose. I'm just
resetting this, it's like, cilck, click, click, click, click. I don't want to unwind the progress
I made with my money. Does that make sense? So, let me share with you a summary of how
to protect yourself when the market loses and maintain the liquidity, safety, earn predictable
rates of return and have them be tax-free. So, this is a very powerful concept. And this
is what motivated me to write several books. I've had several best-sellers. We've been
very, very blessed. But my most recent best-selling book is called The Laser Fund. And Laser stands
for Liquid Assets Safely Earning Returns. Which is what I've been talking about. The
5 key ways to not just survive but thrive when the market goes down. And you'll understand
it really well if you read this book. And I'm not here trying to sell you a book. In
fact, I want to gift one of you these books absolutely free. So, if you go to the laserfund.com
on internet, you pay a nominal shipping fee and handling fee and I will fire out a hard
copy of this. And you'll have some options if you like digital or the audio version also.
But I want to get this book in your hand absolutely free. And I have a passion and purpose for
doing this to empower people to learn some of the lessons that I've had to learn. I don't
want you make the same mistakes that I've made. And this is right-brain, left-brain
book. This has about 14 chapters with about 200 pages, chart, graphs and explanations.
This side is actually a second book. You read this way. And it has 12 chapters with 62 actual
client stories. And you'll learn how to do what I've been talking about in this episode
in more depth.