Ep 86 – Stocks vs Real Estate: Dealing with a Market Downturn

Every major index has been hammered this year. Whether it’s 15, 20, or 30% down, none of them are faring well. Real estate, however, continues to chug along, even with increased mortgage rates.

The big question is, what would you do if you were retired in this situation?

Adam Schroeder goes into your options for living your life if you were retired and experienced a market downturn, depending on your investment strategy.


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Hey, Rent To Retirement, it’s Adam Schroeder here. Thank you for joining me on this episode. And today we’re going to talk about what is happening in the housing market and in the overall stock market, and how it’s going to impact you as an investor moving forward. Let’s just look at this year, in the major indices. The NASDAQ year to date is down almost 30%. The s&p 500 is down about 20%. And the Dow Jones Industrial Average is down 15%. Just year to date. Now I know if you’re 30, if you’re 40, maybe even if you’re 50. This presents a buying opportunity for you, right? Because now you’re buying stocks essentially on sale. But let’s take a look. And let’s think about the future, not just today. If you were investing in stocks now, and you retire in 1520 10 years from now. And all of your money and all of your income is coming from stocks. What are you going to do? If something like this happens again? If your net worth drops 1520 30% in a year? What are you going to do? I want you to think about this as you listen to this clip from the Wall Street Journal’s your money briefing as to what elderly people or retired people can do in this environment.

So how is this bear market different for someone older who can see retirement and then your future. So retirees and near retirees are in almost the opposite situation. Because young people are accumulating assets in the stock market, and people in or near retirement are de cumulating they need their investment portfolio to provide some of the income that will sustain them during retirement. So a bear market can be especially painful to someone with that investment horizon. And there isn’t much you can do with your portfolio itself that will mitigate that for you, you really have to address your own behaviors. And it’s going to involve some sacrifice and some deferred gratification. You know, some of the ways you might sacrifice a little or defer some gratification that aren’t too painful. I think the first would be you just take a part time job. That way, you don’t have to draw down as much from your investment portfolio, when the bear market has taken a big bite out of it. Because it can be very hard to recover from that down the road.

All you got to do is get a part time job people. That’s what you want, right? That’s why you’re retired. So you can go back and get a part time job. Well guess what? If you’ve been retired 510 15 years at this point, your part time job is going to be at Walmart is going to be a greeter at Home Depot, it’s not going to be back in your industry because your industry is going to have passed you by at that point. It’s not going to sit around and wait for you. It’s not going to stay the exact same. The industry is going to pass you by every industry has changes every year that you need to be keeping up with. So if you’ve retired and you’ve left the industry altogether, you are not going back and being a useful resource for companies. They’re going to look at you and they’re going to laugh. They’re going to say why would we do that when we could hire somebody who’s been in the industry or has just gone through school and knows more than you do at this point? All of your information and all of your knowledge is outdated. Congratulations. Go find a different job. So we look at what real estate’s been doing year after year after year after year. We are seeing increasing prices. Yes, we’re seeing continuous growth in rents. We’ve gone over this before 79 out of the last 81 years have seen rental growth on average in the United States. So you can choose to be down 1520 30%.

Or you can choose to be in a situation where you’re increasing your income by at least two to 3%. Every year, and in good times, you’re increasing it, you know, 1015 20%, it is a situation where you are setting yourself up for success over the long haul. Because you are significantly protecting your downside. This is also why you need to have as many doors as you can get your hands on right now, and as many quality doors as you can get your hands on, because eventually, you’re going to reach the point where you’re going to want to just maintain your portfolios that maybe you, you know, hold one property until capex is coming due soon, you sell it and move into one other one, you know, you might not want to grow your portfolio any bigger, but you want to be sure that you have all the doors that you need, and then some extra doors as well, because you’re probably going to have some vacancies. And you’re not going to have 100% vacancy rate all of the time, obviously, we know that we’re going to have tenant turnover. So you don’t want to have just hit your goals and then stopped. You want to make sure you’ve hit your goals, gone over it a little bit to give yourself the cushion. If you have some vacancies at the same time, or turnover that needs to be done. You’ve got that money there. But what you don’t want is to be sitting there retired, drawing money out of your account and thinking you’re set and then see the market take a dive, because when the market takes a dive, you are going to be stuck. If you own homes, and that market goes down, guess what? It doesn’t impact you. Maybe you don’t have a continuous growth and equity in that property. But you’ve got that property locked in, your payment isn’t going to change, least to become the 30 year fixed rate than most people are currently going. So your payments not going to change. Even if your equity position becomes, you know, not quite as good, your rents are not going to go down, most likely, they’re going to continue going up. So your income is going to stay the same. And when your income can stay the same while everybody else’s is dropping, you get put into a better position, you become the person who is in charge, and the person who is in control of their future.

So look at what’s going on in today’s world, look at what’s out there and think to yourself, maybe this is a good time to buy stocks because they’re on sale. So maybe it makes sense to put a little bit of money into that. But look out in the future and think if I was here in 3040 years, and this happened to me, what would I do? What would I do? And what would you do in this situation, you’d be out of luck, you would be applying for jobs that you’re competing with 20 year olds with four, you’re going to be at jobs where you’re looking at minimum wage, I don’t know about you, that is not how I want to spend my retired years, quote, unquote, retired. And I have no desire for that to be my life, I want to reach a point of financial independence. I want to reach the point where if I’m not working, or if I am working, it’s because I chose to do that. And the path that’s going to lead you there. And if you’re listening to this podcast, you probably already know it. But the path that you can tell your friends, your family, anybody you actually care about is what are you going to do? If this happens? When you need your money most? What are you going to do?

Protect yourself? That is the beauty of real estate investing. It protects you. Yes, the more doors you have, it might seem scarier, but it’s safer. The more doors you have, the more you diversify yourself geographically, price point wise, like I tell people all the time. Don’t just diversify yourself geographically, but make sure your tenant profile is not the same across the country because the next recession, the recession, four recessions from now are not going to hit everybody. They’re going to hit certain groups certain ways. So you want to make sure that your tenants aren’t all a certain group, just in case that’s the group that gets hit. So diversify yourself, get into an asset class that in downtimes still performs well consistently. Consistently. It’s been shown to perform well During downtimes, don’t be the one sitting there saying Hi, welcome to the store, good to see you. Don’t be the person sitting there going paper or plastic, take charge of your investing journey, get control of your assets, and put it in a place where it’s going to be treated well, you’re going to be treated well and your income is going to either stay the same or grow every year. Because it’s one of the essentials, housing, right? Food, clothing shelter, we provide 33% of that, we provide the shelter. And that isn’t going to stop anytime soon. Last I checked, people still needed it. Last I checked, they’re not making more of the earth to build on. So we are in a situation where a lot of good can come. And you have to protect yourself from the future. And since we don’t know exactly what the future is going to hold, when it comes to the stock market, and those sorts of investments, find an avenue where you can protect yourself during those times. And that’s real estate to me. So look into it, head on over to rent to retirement.com, check and see what we have. And just look and see if it’s something that makes sense for you. schedule a call with us. Let’s talk about how we might be able to help you on your journey. I’m not saying you need to sell every single stock you’ve ever owned right now and buy real estate with it. Although I’ve sold a good chunk of my stock before to buy real estate and I am not sad I did that. But what I’m saying is start to look and see what makes the most sense for your future. Because you want to make sure that you’re protecting your future you want to make sure that you’re living the life you want on your terms. So rents retirement.com Look at our inventory, schedule a call. Really appreciate you listening. If you have any questions, email them to podcasts and rent to retirement.com. That’s podcast at rent to retirement.com please head on over to your podcast platform. Leave us a review. we’d greatly appreciate it. And we’ll talk to you on the next episode.

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