 This is Think Tech Hawaii. Community matters here. And guys, we are back here on Think Tech Hawaii with the Prince of Investments show. Back here in the beautiful state of Hollywood, well, that's where the show is at. But I'm in Denver, Colorado. If you take a look behind me, it looks a little different from what you've seen on the show. I relocated and by relocating, now I'm in Denver, Colorado. I was off the show for about two weeks. But due to technology, we are back live here in the beautiful state of Denver, Colorado, being aired in Hollywood, Hawaii. But that's all right. That's fine. But anyway, I know you guys probably tuned in today. And you guys can see the title. We're going to be talking about a bear market. We're going to be talking about the market, the downside, how to get prepared for it. Anybody that's following the market right now, you know the market is extreme, not extreme high, but all the time high. You know, the market, we're in a bull market, which is the opposite of a bear market. We're in a bull market. We'll see equities and stocks are doing pretty good. You know, everything is going up. I think the S&P 500 now is up around 19% or 20% for 2017, which is not that bad, right? So a lot of people are joining. And there's also, you can't forget about the juggernaut right now, Bitcoin, which is jumping between 1700 to 17,000 to 19,000. You know, it's had over 1,000% return this year. So we have all type of great experiences that we have going on the market right now on the upside for people that have been with the market. Now we're going to be talking about where the market crashes. What if the downturn happens, right? What is a bear market? All the other great stuff that we're going to discover, how to get you prepared, how the things that I learned, the exact funds out there, the way you can prepare your portfolio for the market. I know you're probably asking, so Prince, what make you think it will bear market once the bull market? Hey, you don't think about building a ship when it's flooding. You build it before the flood, right? So that's what I'm going to do. First thing I'm going to talk about, what is a bear market? The bear market itself is a 20% drop, a 20% drop on the major indexes for over two months, a 20% drop. The last bear market we went into was October 2017 until March 2009 when we bottomed out and we turned into a bull market. Now think about it is from 1900 to 2015 we've had 32 bear markets, 32 bear markets that we have experienced. Now we don't have a question of, is the bear market going to happen? The question is when. So we know this is going to happen again. We have seen this happen 32 times in the last 115 years. We have over 115 years of data that says a bear market will come again. On average this happens between every three, three and a half years the bear market happens. Every three and a half years that's when we kind of see the bear market come into play. So right now we haven't seen this since 2009 and some people say it's eight years or whatever the case may be. Because eight years ago that's when we experienced the 2008 market collapse and in 2000 we see the market collapse again for the tech bubble. But these bear markets is always going to happen. Now it got me onto this topic besides when it was going to happen. I was reading Tony Robbins book Unshakeable. And while I was reading his book Unshakeable what it did was it had a section and it was talking about the bear market. And it got by the name Peter Murloc. I think it's Peter Murloc or Peter Murloc. Peter Murloc I think it is if I'm saying it. Hopefully I'm not butchering his name. But he was in the book. He had a chapter two in the book where he was speaking about how to prepare for a bear market. Why was he reading this chapter or why did he write this chapter? Because he owns a company if not mistaken it's called Creative Planning. And what Creative Planning did prior to 2009 they had he had an assets management of $500,000. He navigated the bear market so perfectly when it ended he was at 2009. Now when the bear market ended in 2009 his $500,000 turned into $1.8 billion for himself and his clients. So that is a awesome awesome job that he did how he navigated through the bear market and went from $500,000,000 to $1.8 billion. And today he manages over $22 billion in assets and the management which is immaculate. So he's someone who's very experienced who saw the bear market coming. He was prepared and when he was prepared he told how to get prepared and he navigated through it perfectly. And one of the things is when I was reading the book I noticed that my portfolio itself wasn't ready for a bear market. Myself before that I was anticipating hey if a bear market happens what I'm going to do is I'm going to invest through it. But that's what I read and when I learned about him I read some more things of him. And I actually called his office and you know maybe coming on to the show one day but stay tuned for that. But anyway he gave us some very interesting tips that I'm going to give out right here on the show today how to get prepared for a bear market. First we're going to be talking about mental. The mental state. I think it was Benjamin Graham. His last name is Graham. I can't think of his first name. It was Warren Buffett's mentor. And the thing he said the one of the worst things that person investors is his emotions in himself. He's the hardest factor to get rid of outside of investing. When you're investing when you see a bear market come or when it does happen it may happen tomorrow. It may happen two years from now. It may happen three years. But I'm not trying to time it. It was a time before when I was thinking I was going to I'm going to just wait till the market goes on sale then I'm going to jump in. Now you're trying to time the market. You know people that you know how many people out there that are successful at time in the market practically none. Right. And we're not talking about regular people like you and I were talking about some of the best investors in the world hedge funds. These guys have billions of dollars of resources around them. So this is the way I want you to think about it. When you see a bear market the bear is not not anything to be scared of. The bear is your friend. When a bear market comes it doesn't come like I started investing in 2007 2008. It was my first time in the market. And it was absolutely the best time to enter the market for a seasoned investor. But the worst time for a amateur investor without having the financial literacy and knowledge when the market starts to collapse. I thought to myself man it's likely maybe in the world because all you see throughout the media everybody saying hey we're two wars. Hey we have gas prices was all the time high. What was in Iraq? What was in Afghanistan? Gas prices at all the time high. Unemployment was at all the time high. Companies like Lehman Brothers, Ford, Bank of America all these companies the biggest insurance companies are collapsing collapsing. When I turn on the television and just watching the market collapse the market dropped 54 percent. You imagine that 54 percent drop in the market itself that is crazy. But the thing to think about that as the market collapsed I became scared and I said wow well I don't know what I'm doing investing. Every day I turn on the news. Every day I open my portfolio I'm losing money. I would have put my money in cash and wait till the bottom comes or figure out something else. Wrong amateur move. I shouldn't have kept investing throughout the bear market. But I looked at the bear as an enemy versus a friend. When the bear is your friend. The bear is when you see things go on sale. Throw yourself. Now we're going to get into how you can prepare for the bear market. For most people out there one of the best investments you can make is, I mean it's not one size fit all. One of the best ways to invest in the stock market is instead of trying to pick stocks it's to pick the index. Pick an ETF and I say ETF because it's a low cost ETF that tracks the S&P 500. You have mutual funds that do it. You have index funds that do it. But me personally as what I know now my knowledge now I see ETF as being one of the best resources to track the stock market. Now the reason why I say this is that an ETF that tracks the S&P 500 a mutual fund that tracks the S&P 500. The index fund or anything else that tracks the S&P 500. They all have the same performance. The only underlying difference I see is it may be Vanguard or it may be iShares, different companies that may do it. But at the end of the day they all have the same objective. At the end of the day the biggest difference is the fees. How much are the fees? If I'm going to get the same car why pay more for it? The lowest cost I know of right now is a Vanguard ETF by December B000 which has an expense ratio 0.0 full. So with that being said I think that is one of the best ways I will go. Now don't confuse a bear market with a correction. A correction is less than two months. A bear market is when it goes over two months. 20% drop and it happens over two months that is called you are now in a bear market. If it drops more than 20% it happens less than two months. Now you know what they call a correction. The stock market took a correction, a drawback. We all know Bitcoin is up and up and it's running like crazy. It may have experienced a drawback. So if it's less than two months it's a correction. If it's more than two months it's a bear market. Now another thing I want you guys to think about we're going to get into how you can prepare yourself. How to prepare for a bear market. Now I just said if you are in an index and sell your portfolio a good thing that was brought to my mind, to my attention was government, not government, but bonds. Bonds, do you want to know what bonds are? Here's a quick one on one that the way he explained it what I thought was in G's. But it's very true. Four types of bonds, right? A bond is nothing but a loan. You're a loaner selling on your money, right? This time you are the lender. Most of the times when we go get a car loan with a person that takes some money. This time you're going to lend someone else your money for interest rate. Simply and easy. Now when you lend someone your money and they're going to pay you back with interest, it's for what it's done. You can lend it to the government and let it be called a government bond or a Treasury bond. You can lend it to a city to build cities and things that are for a state to build different type of infrastructures. What's it called a municipal bond? You have when you loan to a corporation, that's called a corporate bond. And when you loan to another country, it's called maybe a quote unquote high yield bond. Now let me break those down a little bit for you. A government bond is just like when you go to get a car. You have a loan. If you have good credit, meaning that you're trustworthy, meaning that the likelihood of you defaulting on this loan is pretty low. You usually get a low interest rate. But if you have a low credit score, your trust ordinance is low, the likelihood of you not paying as long back is pretty high. Now you're a risky person to lend money to. So you may experience a higher interest rate. With that being said, that is called a high yield bond. So for a prime example, investing in the United States, investing into the United States versus investing into the Venezuelan government, maybe investing into a Venezuelan government is risky. By being there risky, they pay more of an interest rate. The US government, they have good credit. The interest rates are pretty low. So you may get 1% for getting a bond from the government in the United States, but by getting one in Venezuelan, it may earn 10%. You may earn more. But by earning more, then again, the likelihood of them defaulting is pretty high. So that's what I want you to think about. So the thing about it is, hey, a lot of people like to run to cash, but we all know in the investing world, cash is trash. Cash is not good because it doesn't earn anything. It doesn't do nothing for you. But so if you are keeping your money into a regular checking account, that's very low. A step above that is a savings account. A step above that is a CD. A step above that is not going to see the main market than a CD. But the thing is, you put your money, or you hide your money, you put your money into a bond where you have an income from it. Now, if you have an income coming from your bond, if you're not being fluctuating with the market or anything like that, you may be earning about 1%, something like that. Maybe a low percentage right now because, you know, we're in a very low interest rate society right now. But you're earning a nice 1% compared to bleeding the savings account, where you're going to earn maybe .25 or something like that. So, hey, you put your money into a bond where it earns money. Now, your money is earning money. And you keep your credit low where you don't have to worry about having to sell bonds in a bear market. That's a no-no because when a stock market goes down, the last thing you want to do is to be the person that's selling your stock because you need to go pay bills or something like that. So, you want to have your stocks. You don't want to sell your stocks. You want to keep your stocks. If you have stocks, a.k.a. equities or anything like that, you want to keep your stocks and ride out through the bear market. You want to buy more stocks in the bear market. So, what you're going to do is you're going to have your money saved into a bond. Bonds are gaining you a nice interest rate. If the market was a collapse going to a correction or going to a bear market, you can now liquidate a.k.a. sell your bonds and buy stocks. Sell your bonds, then turn around and buy stocks. That's a great way to... Because what you don't want to do is some people say, well, I'm going to leave my money in cash and we're going to the next bear market. We don't want the bear market to happen. I mean, think about it. If you thought the bear market was going to happen in 2017, like myself, along with a lot of other people, if you thought the bear market was going to happen in 2017, it could cost you 20% return on your investment. Then you're getting what is called trying to time the market. You don't want to be trying to time the market because if you can time the market out personally, please give me a call and I'd love to be your friend. So, most of you can't time the market and don't even try to time the market. There's no need to time the market. So, if I, instead of leaving my money in cash, I don't know what the next bear market may be. It may happen in three years. But if I'm waiting on the bear market in cash, look how much money it causes me that I can potentially lose by leaving my money in cash. So, I leave my money in bonds to earn some interest and I keep investing into the stock market. Who cares if it's at all time? If the market collapse, what you're going to do is you're going to liquidate, sell your bonds and you're going to buy equities. You're going to buy equities throughout the bear market. If the market goes up, bear doesn't happen. You keep your bonds. So, what does that mean? Today, what I did for myself personally, I know I need to get some bonds. How can I buy bonds or what not, right? One way you can buy bonds is you can use ETFs to track bonds. Now, I'm just going to give you guys an example of a government bond, ETF, that's tracked by Vanguard. Let's say, let's do a corporate bond. VCLT, VCLT, that's a corporate bond, ETF. Now, you can go out there and get a corporate bond, ETF, or you maybe can buy an ETF that pays a nice return for you. Maybe one or two percent, whatever case it may pay you. And if you experience a downturn in the market, you can turn around and then sell this. Hopefully, this ETF is not collapsing itself, but you can sell that bond and then turn around and buy, corporate stocks are going and investing to equities. Now, another thing to prepare yourself for the market, you don't want to have all your eggs in one basket. You want to be diversified. The core of your portfolio should be the index, the S&P 500, an ETF that tracks the S&P 500. That should be the core of your index. Then you want to have some mid cap. Do you want to have small cap? You know, you can get a mid cap ETF called VOO, get a small cap ETF. So you have your index at the bottom of your portfolio. Do you have your mid cap? Do you have your small cap? Do you have your bonds? Then you want to get into real estate, which is roots. Real estate investment trusts, right? So we're investing real estate on stock and stock market. Now you're diversified. Also, you want to jump into an international stock, right? There are international ETFs, I think it's MAS, something like that. It's like Fort East, I can't remember the exact thing. I should have been prepared to give you guys an ETF, but it's international, essentially, right? So you can invest internationally. You can have bonds. You can have index, mid cap, small cap, and a real estate investment trust. Now you're diversified because you're not overly invested into your own country. You have international, you have some bonds. You have small cap index, you have some real estate. So when the bear comes, you don't know the industry the bear market may hit. It may hit small cap. It may hit large cap. It may hit an index. You just don't know what it may hit. But whatever it hits, it shouldn't blow your whole portfolio up. And also you can liquidate your bonds and turn around and buy different ETFs. So another way people like to do it is to benefit from a bear market. They like to go out and wait. So if you're in a bear market, if you think the bear market is going to go down, I wouldn't highly recommend this. They can go through derivatives. They can go out and they can buy put options. Put options give you the right to be able to sell a stock at a determined price in the future. How does that work? Let's say right now Google is trading $4,000. And you purchase the right to be able to sell it for, let's say $1,200 or $900, right? I'll just say it's $1,200. It'll be case to me. Let's say the price of Google drops to, so Google is trading $4,000. You purchase the right to be able to buy it or sell it for $900 for a month or two or whatever the case can be. If the stock drops down to $600, you can exercise your contract and sell those stocks for $900 in the future even though on the market, they only worth $500. So it's a bearish prediction. I wouldn't recommend this because it has an expiration date. You have to, you can short the market. Short the markets when you borrow stocks and then go off and try to short sell and stuff like that. Something I wouldn't be a big fan in trying to short the market in a time like this. Because if you was that good at it, then please, like I said, give me a call. Yeah, you can use ETFs that have, you can use reverse ETFs that if the stock market drops 1%, the ETF goes up by 1%. The stock market drops 50%, the ETF goes up 50%. You can invest in inverse ETFs to benefit as the stock market drops. Now, there's something called leverage ETFs. So like I said, the inverse ETF if it drops 1%, if the stock market drops 1%, the ETF goes up 1%. What if I told you that if the stock, instead of it going 1%, if the stock market drops 1%, instead of you getting 1%, you get 2 or 3. Those are leverage ETFs. Now the thing about a leverage ETF is that if it goes against you, it's going to go against you very bad. But if it goes with you, it's going to go with you very good. So those are ways people can profit or try to profit something that I wouldn't recommend because now you're trying to get into day trading and time in the market and things like that or another one. But one of the ways you can set your portfolio is first, number one, diversify. Small cap, mid cap index is the core of your portfolio. Bonds. We're the state investment trust. I'm not going to get into MLPs. That's for rich people. But that's what you can do to prepare yourself and international. Those are ways you can diversify your portfolio as soon as something hits. You can liquefy your bonds and get more into equities. Review the bear as your friend. Know that the bear market will come again. Historically, it happens every 3 to 5, 3.5 years is when the bear market comes. We haven't seen the bear since 2009, March of 2009. So where is the bear? Is the bear popping its head up tomorrow? We don't know. But you can be prepared by diversifying your portfolio and when the bear comes, invest throughout the bear market. Use the bear as your friend. So those are things that I have learned and those are things that I have shared. Now there are probably tons of other things you can do, which is fine, right? But I just want to go over those as great tools for you to be able to benefit from the market, be prepared, and to slay the bear. As Tony Robinson said in his book, slay the bear. Review the bear as your friend and slay the bear. By diversifying, you're limiting the impact that the bear will have on you. But now you're in a position to where you can actually sell bonds or cash out bonds to CDs. CDs sometimes have a time frame on them, bonds sometimes have a time frame. But you can sell these. Just give me an example. Sell your bonds. Now you have cash to be able to invest throughout the bear market. Because in the bear market, cash is good to have. But you don't want to sit here and leave all your money in cash and wait on the bear. Because, you know, who knows? It may happen in five years. And with compound interest, I could lose money in the future trying to wait on the bear. So don't wait on the bear. Just when it pops up, view it as your friend. View it as a sale when you go into a store. When you see stuff on the clearance rack and how you buy everything up, that's what you need to be able to market the bear as. It's an opportunity for you to be able to buy a lot of things on sale. So, but as all of these guys, I think I hit on everything. How to prepare, diversify, and how to capitalize throughout a bear market. Because when a bear market happens, only two things can happen. Is it with the end of America as we know it? Or it's going to be a rebound. And the last 32 times it has happened in the last 115 years, it has been, it has rebounded. Every time it has rebounded, rebounded, and rebounded. So that's a great way to rebound from the bear market. So anyway, guys, that's going to be my time. View the bear as your friend and know that it's going to happen again. If you got any questions or issues, guys, don't forget to drop a comment below. Thank you guys for tuning. My name is Prince Dykes, the Prince of Investing. It's an honor for you guys to stay tuned. Stay tuned for more. Until the next video podcast, or whatever you see me do, goofing crazy around the globe. Peace, be safe, amount, and thank you.