 Good day, film investors. Whenever I make a video about stock market crashes, my views explode. This means that there is a lot of worry out there what will happen if a stock market actually crashes and when the stock market crashes. However, I think that having a good well-organized strategy when it comes to long-term investing that includes planning for what you are going to do when such a crash occurs, then that makes investing very, very easy. And in this video, I'll give you a complete overview of my investment strategy related to stock market and individual stock crashes, how I balance that out within my two portfolios and why I think that my strategy over the long term will bring to higher investment returns with limited risk. Let's start. So I've been investing since 2002. And in 2002, when I started buying stocks, everybody was saying, you're crazy to buy stocks. There have been the Asian crisis, the dot-com bubble and many, many lost money on stocks. So nobody wanted to buy stocks. I started buying this really, really well. I lost some money in 2008, like most people, but I was aggressively buying in 2009, 2012 during the European crisis. And then I did really, really well. So I have experience of stock market crashes. And this gives me confidence that when the next crash comes, the only thing I have to do is simply buy more of good value when the opportunity arises. However, you never know when the crash will come. Therefore, you'll have to have a timely strategy how to take advantage of the opportunities and not be burned too much if and when the crash actually occurs. So let me show you my portfolios and their crash recession preparation, let's say strategy, discuss the most important things when it comes to recession proof investing, show how crashes happen all the time and how to take advantage of that. And by the end of this video, as I said, you should see how my ideas fit your personal investment preferences, your portfolio, and then whether you can apply those to increase your long-term returns and always lower your risk. Let's start by explaining my two portfolios. I have two stock market portfolios. One is a lump sum portfolio where I invested 100,000 starting this year. So 2019, the goal is to build a track record to maybe later launch a fund based on that track record. So 100,000 lump sum investing, the goal is to maximize investment returns. I cannot add money, buy more or so really maximize investment returns and be careful about risk. The other portfolio is a portfolio that I launched a year ago when I launched my stock market research platform. And the other portfolio is 10,000 initial and then 1000 added every month. I wanted to make a portfolio that reflects what most people do and that is monthly additions to those, to their portfolios. So over the next 19 years, I'll be adding 1000 per month to that portfolio, which means I will be a net buyer of stocks, which makes things very, very easy. You actually hope for a crash, but more about that later. Let's start with the lump sum portfolio, which is very tricky and very interesting for those that have already huge amounts, large portfolios and their financial well-being depends on that portfolio doing well. So let's start on that. The key with such a lump sum portfolio is always to manage risk, to have some cash to take advantage of the opportunities, and then of course not to get burned by having too big allocation with one stock because you never know what can happen. I'm very, very comfortable with having a maximum of eight stocks in my lump sum portfolio, which eliminates permanent capital losses from a portfolio perspective, but still allows me to hold the best eight businesses that I can find, the best value investments that I can find. As I said, I started this in 2019 and I am now 74% invested in seven businesses and there is 26-25% in cash. I'm very, very comfortable in having 20% in cash and 80% invested because I never know when there will be a crash, when there will be a recession. So I think that having 80%, 20% in a normal market environment long term brings to the highest possible returns. I'm not Buffett, so Buffett has a limit. He cannot buy smaller companies, so I can do that. Therefore, I'm much more invested than he is. The most important thing is that you need to have a strategy when it comes to crashes, and my strategy is related to the business yield risk and reward adjusted returns, average long-term returns I can get from the businesses I invest in. So my goal is 80% invested when I can find investments that will lead to a 15% long-term average yearly business return. The investment has a margin of safety and is generally a good value investment. If some stocks crash and there are more opportunities and when those businesses, the same businesses or other businesses offer 20% average long-term business returns from earnings, from dividends, from future cash flows at acceptable risk, I'll increase my exposure to 90%. When those returns increase to 25%, I'll go 100% in, and if I find great businesses that offer 30% and higher long-term business returns at very little risk, the dividend is more than enough to pay for the margin interest, and there is no way to get a margin call because the margin call happens only if my whole portfolio falls another 50%, 60%, 70%, then I might go 20% of the portfolio on margin. The point is that I will not do something just because stocks crash or this. I will always look at the long-term business yield. Businesses are much more stable than stocks that go up and down. So if I focus on that, those businesses, earnings will be a little bit lower or even no earnings when there is a recession, then those earnings will grow and it will be cyclical, but much more stable. And if I can buy and sell around those cyclical situations, then I'll do very, very well. And the business focus, the business yield, the focus on the business yield gives me the courage to buy when others are selling and even sell when others are exuberantly buying. Let me show you the business value I own because I think it will be extremely educational. So if I look at my LAMPSAM portfolio now, the portfolio exposure is focused a little bit on commodities because that's something I can really understand well and I feel it's something that will do well over the next decade because of the tailwinds in the sector. Plus it's cheap at the moment, so I like to buy things. I like to buy value on the cheap. As you can see from the third column, the average price earnings ratio is about 10, which is much lower than what the market offers now. Plus most of the companies are growth stocks, growth companies alongside value. If you look at the dividends, price to book ratios and debt to equity, you will see that there is no fixed level as I mostly invest in the long-term business outlook. So I try to find undervalued opportunities and I also try to find value in something that might happen three, four, five, ten years down the road. So the real value is not yet reflected into fundamentals. Nevertheless, the company has either high strong cash flows, which you can see with the high dividend yields or very, very low debt, which means that whatever happens, high gross margins, whatever happens in the sector, the company will survive, which is a very important margin of safety for me. I'm buying quality assets. I believe all the businesses trade below intrinsic value, which gives me, again, a margin of safety. Now, when it comes to investing and a stock crash can always happen, I think there are three key factors that you have to implement in your strategy. A margin of safety, focusing on the business yield and don't forget about dividends and takeovers. For a margin of safety, I simply believe that if the business is good, the business will be there in 10, 20, 30 years. It gives me certainty and safety that if the stock price crashes, there is enough, no margin of safety for stock price protection, I can simply happily buy more because I know that I'm buying value. That's it. That's my margin of safety, which leads me to the second thing and the focus must be on business returns. Long-term investment returns are perfectly correlated to the underlying business returns of a stock. I'm focusing on those and I'm trying to find business returns that are underappreciated by the market because of who knows what. The market is over irrational. So when I focus on those business returns, I know that my returns will be close to what the business yield is delivering. So if I can work hard and find those businesses that will give me 10, 15% plus some growth plus a margin of safety, I'll do well. I'll explain what I mean by discussing the SAP 500. The current earnings business yield of the SAP 500 is 4.72%. At the current level of 2,852 points, the business earnings are 144.8 points. This means that an earnings yield of 4.7 will lead to long-term investment returns of around 5%, 6% when you add the growth inflation, etc. So if you wish for safety and are happy with a 5% return, buy the SAP 500. Now, if you know stocks are volatile and there could be a crash coming, then you can manage your lump sum portfolio by putting portfolio exposure thresholds depending on the yield you require. Let's say that at the 4% yield, the portfolio exposure is 70%, short-term treasury is 30%. This is all arbitrary. See how this fits your personal investment scenario. SAP 500% you increase the exposure, lower the treasuries, at 7% you're 100% in stocks because you are happy with the long-term return of 7%. Such a strategy will allow you to be happy if stocks crash as you will be able to buy more of the things you already own and like at a lower price, which means you will buy at a bargain. And the most important thing with such a strategy is that you buy more when those things actually crash. You have to be reasonable with what your capabilities are. If you don't want to think about the stock market and are happy now with such 5%, 6%, 7% returns, the SAP 500 might be the best answer to that because you simply buy. You don't have to think about anything. You're exposed to the global economy. And when the yield is the average yield, you can use a cyclically adjusted price earnings ratio, the CAPE ratio that shows 10-year average earnings. When the yield is where you like it, you buy more. When it is above, you sell a little bit, you manage that. And then whatever happens, crash or no crash, if stocks go up, you're happy or richer. If stocks go down, you buy more. That's your managing risk. And when you manage risk, whatever happens in the stock market, it doesn't really matter to you. And then there are dividends and takeovers. People used to forget dividends because what is 2, 3, 4, 5% when stocks go up and down 5%, 10% all the time, especially in a month or in more longer periods. But when you focus on those dividends, then you can see, okay, those dividends bring in more cash, which allow you to manage your risks even better. If there is now a crash, I'll be getting approximately 4% on average on my portfolio per year. And those dividends are expected to grow. So 4,000 in my case, 4,000 something will be reinvested just from dividends. If stocks crash, I could again buy more of what I own. Then on eight positions, there is always the possibility that a takeover happens, the company counts, pays a premium. And suddenly you find yourself with 10, 15, 20% additional investments in cash. And then you simply patiently deploy it again when some investments hit your business return threshold. So these three factors really allow you to easily manage risk and in relation to potential reward and make things easy when it comes to stock market crashes. Now on the model portfolio, the portfolio that I started with 10,000 a year ago and where I add 1000 per month. And now it's a little bit higher. You see the additions have added to the value, some stocks have gone up, which is again a positive, but that's mostly because of market volatility. Long term should be okay. And now here I have written down the added amount, which is 12,000 per year. Then I have used the discount rate of 10% and calculated the present value of the added amount over the next 19 years. The current portfolio invested is just 24,000. The current cash is 1,800. But the value of the futurely added cash, the sum of present values of the 19 years times 12,000 that I will be adding is $1,000. So if you put it in that perspective, the total portfolio now is 127,000, 28,000 and the cash is 102,000. So when you have such a portfolio, when you constantly add money month by month, month by month for the next 10, 20 years, even 10, even five, then you should be extremely happy when a stock market crash happens because you can then buy more, own more, have higher yields, higher dividends, higher earnings yields that will increase your long-term returns and lower your risks because risk is a function of price. So the lower the price, the lower the risk. So this makes things easy. If you're investing every month, if you're adding to your portfolio every month, simply embrace stock market crashes, be happy when those happen because you will do well and because you're buying more on the chip. It's like a sale in the store, in the supermarket. So think that ways if you're adding on a constantly monthly basis. So before going on to the stock market crash scenarios, just to conclude on my portfolio strategy, it's really, really simple. I buy value, below intrinsic value, focus on the business yield that will lead to long-term stock market returns, take advantage of the volatility, increase my exposure if the yield goes up, lower my exposure if the yield goes down, balance the risks and carefully watch my basket with my seven, eight eggs because I want to know everything that goes on with the company. What are the long-term risks? Are there changes in the management, et cetera? But that's what I do. If you don't have the time or don't want to bother with stock simply, you can use the SAP 500 index. And then if you add on a monthly basis, balance your portfolio exposures, you'll do extremely well over your long-term investment horizon. However, there are some stock market crash scenarios that really emphasize what am I talking here. It's extremely important to know that markets are not linear, stocks crash all the time. You can't time the market, a crash can be inflationary plus there can be a currency collapse. Let me show you the Chinese stock market compared to the SAP 500 over the last five years. And you will see that stock market crashes are not linear. Something crashes while other things go up. If you compare the two indices, you can see that the SAP 500 was much, much less volatile than the Shanghai index. And the Shanghai index has gone through three bull markets and two bear markets in the last five years. So while something was stable, something else was crashing. So you can always take advantage of opportunities. And there will always be something crashing. So you can sell something, buy something else, and then take advantage of other bull markets, because that's the nature of the stock market. What is also important is that not everything crashes at the same time. The SAP 500 has been down 2.6% over the last month, but some stocks have jumped 26% at the same time. Long term, some stocks will go up even in a crash. This is Gazprom, they increase the dividend and then the stock jumped significantly. So the message is don't focus on the general picture, focus on the individual positions. Something will go up, something will go down. Just be prepared. And if something is a much better bargain, buy more of the bargain. Then stock crash all the time. If you look again at my portfolio, the average decline from five year peaks is 41%. I would call that a crash. So practically all my stocks have crashed except one. So crashes constantly create opportunities and crashes are always around us. I wish I could time the market, but all I can do is focus on the business, because I cannot predict those crashes. And market timing is very dangerous. And I've been listening to market crash predictions since I started investing in 2002. There will be a recession, there will be a crisis, buy gold, run to this political collapse, you name it. But those are risks, those can materialize, you simply have to have a plan and then everything becomes easier. So the main message is again have a plan. Let me explain this. So if you invest, and let's say you buy a business that has a long-term 15% earnings yield, so you expect it to grow for 15% over the long-term. And over the next four years, things go good. But then there is a crash of 30%. After five years, you are still ahead. Your $100 are 106. If that happens again, again over five years, you are still ahead. Now if a recession happens every five years, okay, your returns will be good. But in the meantime, there will be takeovers, there will be exuberance, there will be high volatility. So nothing will be linear, as we said. So you can take advantage of those, sell earlier, buy something else. So you will do even better than these returns that have crashes coming constantly. Further, it's much easier to focus on individual stocks than to listen to market gurus. If I would have listened to Ray Dalio in 2018 and not bought my copper miner, which was my largest position in January of 2018, because if there is a recession, copper prices simply go down the toilet, then I would have missed on what was a great investment, the best investment of 2018 for me, because I would not have bought a copper miner, in this case, Navson Resources. However, I believe that at prices below 2.5, it was a huge bargain. And even that if there was a recession, I could wait five, 10 years for the value to unlock. However, Z-Inmining bought it out, I made a huge return. And if I would have listened to the doom and gloom situation, I would never have bought. Further, a crash can be inflationary and there can be always a currency collapse or inflation. And if you just look at Argentina, the Argentinian Merval index is up 34 times over the last 10 years, while the peso is down 93% against the dollar over the same period. So 1,000 invested, 1,000 dollars, American dollars would still now be around 2,450 since 2008. That's better than the SAP 500. So always keep in mind that if there is more inflation, businesses, value investing, buying productive assets will bring you a lot of protection, better than many other things. So for me, it has been simple over the last 18 years, focus on value, value, value, buy below intrinsic value, look at the business earnings, future potential dividends, future potential cash flows with a margin of safety. When you balance that, there will be crashes, stocks will crash, I'll have a buffer to buy more, which will increase my long-term returns. This is my strategy. If there is a crash tomorrow or in five years, I will do well anyways. So the key is have a plan. I hope that I have helped you with this plan. Leave a comment below if you have further questions about this. Thank you for watching. Please consider subscribing if you like this mindset. Check my website if you want to know more about my research portfolios, everything. Thank you for watching and I'll see you in the next video.