A recession is coming. That’s all I seem to hear these days. Raising interest rates plus Trump saying dumb stuff is going to crash the stock market and destroy America!
I’ve heard variations of this on social media and in real life. Following the JL Collins’ investing approach of keeping most of my money in VTSAX; you might think I’m worried about the crash. But that’s not really the case. Let me tell you why.
US Stocks have always recovered
Look at the charts, the US stock market has always recovered. One of my investing rules is, don’t invest money I will need in the next five years. That’s about how long it typically the longest it takes for everything to recover after a crash. For example if you’re planning to buy a house and have painstakingly saved a $50,000+ down payment, don’t put that in the stock market, keep it somewhere with less short term risk!
I can’t predict the future. At some point we will have a recession but I have no idea if it will be in 2018 or 2028. If I could predict the market with accuracy, then I would sell everything at the top and buy everything at the bottom! But this isn’t the case. If the next significant stock market correction doesn’t happen for years, then I missed out on years of gains. Additionally, VTSAX pays a small dividend of about 2%. Right now I have that dividend invest back into the fund but I could just as easily have that deposit into my bank account.
But Steve, what if US stocks don’t recover?
Well then we have a much bigger problem on our hands, the collapse of the West. Better start learning Mandarin.
My wife and I are DINKS. Our current lifestyle isn’t that expensive to maintain. I work in the cutthroat startup world but she works for the federal government. She has a lot of job security. Outside of stealing or fighting, it is almost impossible to get fired by her employer. So if something happened to my job during a recession, we could easily live on her income alone.
I started my career late due to my travels and started investing even later. I’ve never had the opportunity to buy what I would consider cheap stocks or cheap local real estate. During the past few years, prices were always high and always climbing higher. If you consistently buy stocks during a recession, you will pop out on the other side quite wealthy.
I have my eye on a handful of cities I’d consider buying property in. I’d love to be able to buy at rock bottom prices. Maybe I’ll even get an RV or a boat!
Current Net Worth
Considering I’m still employed and not anonymous, I don’t feel comfortable giving my exact net worth. I can say that the first five years into our FI/RE plan have been rather successful. While we are not yet financially independent; in a worst case scenario, we could survive over a decade without income.
And even if I lost my job and became a stay at home husband, we would inevitably reach financial independence on our current investments alone.
I’m only human so I know I won’t be emotionless when the next recession occurs. However, I also know that I don’t have much to worry about. Everything will work out because we’ve put precautions in place. My wife and I have worked really hard the last five years, insuring we have a huge cushion.
What are your plans for the next recession?