 This is Think Tech Hawaii, Community Matters here. Guys, welcome back here to Think Tech Hawaii. This is your host, Prince Dykes, coming to you guys live all the way from the beautiful state of Haluulu, Hawaii. But anyway, guys, I want to thank you guys for tuning in and we are now on episode 10 and we're still having gotten canceled. That's pretty crazy, right? But as always, guys, I don't have a lot of time and I definitely, you guys don't have a lot of time. So we're going to jump straight into it. So today's topic is going to be about what if the stock market crash? If you look into recent news today, today's October 10th, October 10th, the stock market is at a all-time high. The Dow Jones went up 70 points, crossed over into a new domain, right? So we've had been centered, the market has been on an uptick now for about five or six years. You've seen a bullish market. Now we got to think about what everybody is greedy, right? Not greedy, but right now the market is looking a little greedy. We're going into higher states, but we have to think about the downside. What the market crash, right? A lot of people are writing me saying, Prince, I invested into this and I'm making this much money or I made this great investment. Right now it is very easy to make money in the stock market. I won't say very easy, it's never easy, but it's very easy if you buy something and it goes up, everything is going up. It's what's called a bullish market. But what happens if it crash? What happens if things go down? But I have here listed about five or six points that I'm going to go through and we're going to talk about particularly ways that you can invest to hedge against the market. Now for you guys that don't understand what hedging means, hedging is pretty much like insurance if something goes down. You buy a stock for it to go up but what if it crashes, right? You have a car, right? You buy a brand new $20,000, $10,000, $15,000, $40,000 car, whatever type of car you have, but you buy insurance just in case something happens. Happens to it, that's hedging. Hedging a bet or hedging an investment. What if this investment goes belly up? If what if I crash, something like that, right? What if the market crash? So without further ado, let's get into it. Now, if you don't know what ETFs are, ETFs are exchange-traded funds. Exchange-traded funds, they are, right now, they're one of the lowest instruments that you can track something. Let's say if you're looking to invest into, right now, let's say Bitcoin, right? Right now there's not an ETF for Bitcoin, but it's thousands of Bitcoin companies that are out there, right? And with these thousands of Bitcoin companies that are out there, you may sit back and you may say, hey, let's, you may sit back, you may have thousands of Bitcoins, right? But you may not know which company to purchase or which company to buy, right? So with that being said, by you not knowing which company to buy, you may not know how to invest into it, but what the ETF does is it compacts all of those investments and you can just track the particular investment, right? So that's one thing I want you guys to think of. That's what an ETF is. In an ETF, it can track something and you can also use an ETF to bet against the market. It's called an inverse ETF. I didn't list down a particular symbols, but that's something you can look into. An inverse ETF is doing the opposite. It gains value as the stock market goes down. You may sit back and say, Prince, that doesn't make sense. What it does is it uses contracts and use derivatives. I don't want to get too lengthy here, but it uses derivatives to sit back and say, hey, this is what we want to do. One second. Guys, we're going to jump straight into a break and we'll be back live here on the Prince of Investing. This is Stink Tech, Hawaii, raising public awareness. My friend, mother, what big eyes you have. She's sad. All the better to see you with my dear. That's so cool. What are you doing? Okay, cool. Research says reading from birth accelerates the baby's brain development. And you're doing that now? Oh, yeah. This is the starting line. Posh. And this is over. You're dead. Read aloud 15 minutes. Every child, every parent, every day. I just walked by and I said, what's happening, guys? They told me they were making music. So I do. Guys, we had to take a quick break there. You know, phones was ringing, other phones was ringing, all the other good stuff, so. But that's perfectly fine. Glad you guys were calling in. If you guys want to call in, feel free to call into the show. We can talk here live. As before the break, we were talking about inverse ETFs, ways that you can invest against a particular market. Now, when you invest against a particular market, what happens is you, inverse ETF, a regular ETF like the VU, V-O-O-O, which tracks the S&P 500. It just tracks the market as it goes up. You can have one track the market as it goes down. So as the market goes down, you can, the ETF gains value. Another one, people always say gold. Gold, gold, gold, gold, gold. Gold is a great way to hedge the market. And I was reading the book yesterday called, Investing Demystified by Lars Kroger, who was here on a couple of episodes ago, and he brought up a great point. He said, we always say pressure metals and gold is a great way to bet against the market, but he brought up an interesting point when he bought a Bitcoin, and he was saying, hey, I bet the next time the market goes down, instead of people running to precious metals and golds, like we historically do, people may run to cryptocurrencies. That was a very interesting aspect that I read in his book over the weekend. Now, gold for itself is a precious metal. When the market gets scared, or when people go down, people start to sell. That's what causes the market to collapse. Maybe what can trigger it? Who knows? Maybe it could be a missile get launched, from whatever the case may be. Maybe it could be some big companies defaulting on loans. Whatever the case may be, it can start the market to collapse. And when the market is collapsing, that means people are selling stuff. When people are selling stuff, that means people are, the market runs by two emotions, fear and greed. When people get fearful and they start to retract and start to sell their particular positions, when they sell their particular positions, what they do is a lot of people run to gold because they consider gold to be a safe haven. So when the market is doing great, people run into the market like right now, everybody's cheerful and joyful and your 401k is gaining value and you think you're a genius because you purchased Facebook and it's going up and Google is going up, Amazon is going up, Home Depot is going up, McDonald's is going up and their list just goes on and on, right? All these big blue chip stocks, everybody's just having a good joyful time on the market. Now gold, when the market is doing good, doesn't do that well, but when fear comes into the market, like we did in 2008, that's when you will see people start to run to more precious metals. So gold is the second way. The third way is another way for a prime example, well you know about Berkshire Halfway, one of Warren Buffett's company. Warren Buffett's company is sitting on billions and billions and billions of dollars of cash. Historically in the investing world, like on the last episode, what I said, people may sit back and say investing is, trash, cash is trash, that's what people say, cash is trash and what they mean by cash is trash, is that hey, by keeping your money in cash, that's nothing, it's doing nothing for you. A checking account is getting you 0.05, you need to invest the money, right? Which is true, I would agree to, but a lot of companies, what they do by having cash into an investment portfolio, it gives you the ability to be able to buy on the downside of the market, right? What I mean by on the downside of the market is if the market was to collapse or the market was to go down, this is a great way for you to make money, right? Not to make money, but a great way for you to be able to invest. So if you have a bunch of money, you can take advantage of when the market crashes. So right now, everybody sees the market going up, so they may want to sit back and invest all their money into the company, not to the company, but invest their money into the stock, not to the stock market. But a lot of people say, hey, if the market was to collapse tomorrow, if you don't have any money or any cash in your account, you can't take advantage of things when they go on bargain or when they go for cheap. So for a prime example, let's think about it in layman's terms, if you go to a store, right? You spend all your money on the brand new items, when things go on sale or go into a cleanse rack, you now, you don't have any money to go purchase stock. So people look at it as cash is a great way to hedge against the market. So about piling up a bunch of it, you know, or whatnot, it's a kind of a weird, not a weird thing to say, but it's a thing to think about. Now, it's something that I was noticing over the weekend, something called preferred stocks. You have preferred stocks, you have common stocks, then you have preferred stocks, then you have bonds. Goes from level of risk. Common stock, like a regular stock, you're going to eat trade to the Ameritrade, call your broken purchase. Below that, you have a preferred stock, which you have a little bit of the stocks or whatnot, then you have a little bit of bond features. Below that is bonds. The biggest thing about that is, if a company liquidates me, go bankrupt, the first person to be paid is the bonds. Second would be the preferred stock, and third is common stock. Now, the thing about preferred stocks is why I bring that up is, when you have a lot of money sitting in cash, and you're waiting on a downturn in the market, it has been, people have been waiting on a downturn in the market for three years. And over those three years, this year right now, the S&P 500 is up about 14%. Last quarter, the S&P last year, if I'm not mistaken, it was up like eight or nine, something like percent. Long story short, the market is, by standing on the sideline, you have missed out on some great opportunities. Some people are, you know, waiting on the bottom to fall out of the economy, or they're waiting for the market to crash because they think it's too hot. And by them doing that, they have missed out on some great returns that the market has been earning. Like I said, we've been hitting all-time highs now for probably about every month, right? So that's something I want you to think about when you're looking at a, when you're looking at, when you're holding on to cash, when you're holding on to a lot of cash, and you're waiting on the market to crash, or you're waiting on a downturn, waiting on things to go to, for sale, where do you put that cash at? Do you put it in your closet? Do you put it in your mattress? Do you put it wherever the case may be? But you don't know where to place it. So one of the things I was looking at is, maybe you may look at something like a bond, or preferred stocks, or an ETF that tracks preferred stocks, or something like that, because you get a guaranteed interest rate, when you have credit risk relying upon the company, but it's another place you can put your money, your cash, and gain a nice return, because if you put in a savings account, interest rates, a savings account, you're gonna get about 0.05, 0.05. If you put it into a CD, you may get one or 2%, but if you put it into a preferred stock, these things are paying 5% to 6%. So what are preferred stocks? These are pretty much, it's a way for companies to make money. They sell the preferred stock to you, they give you a piece of paper, they take the money and grow operations, almost like a bond feature, it's like between a bond and equity, but I don't wanna go too far off into preferred stocks. Just something to think about, because of the high interest rates for where you can put your cash at in the meanwhile. And I does have a credit risk, so it's a risk with everything. The next thing I can you invest a hedge against a down return of a market is you can do something called option trade, where it's a put option, right? So for example, you go out and you pay $1,000 for Google stock or $2,000, $10,000, $100,000 for Google stock. Once you pay this type of money for Google stock, you have to wonder what if the particular company, the bottom falls out of the company? So if the company goes bad, right? Now for a prime example, when you have a Google stock or a stock like that, what if the company, it's like insurance? Why do you pay insurance? You're saying, hey, if my car or my house or whatever burns down, I want to be able to find a way to where I can get money to be able to go buy another house, right? That's the whole purpose of insurance. So a put contract has that same feature. So for a prime example, you may pay $1,000 to buy a Google stock. But then you can go off and purchase a contract, right? That says, hey, if this stock drops to this point, if this stock drops to $800, I have the right to be able to sell it for $800 by this time in the future. If the stock does drop, you get to exercise the contract. If the stock doesn't drop, you know, you pretty much lose the money that you paid when you brought the contract. The contract expires worthless, right? If the stock continues to go up. Same concept you do with your car insurance. I pay car insurance, homeowner's insurance, you pay insurance every month. What if you don't have a car rate? What if nothing happens, right? If nothing happens, then, if nothing happens to the stock, for example, if nothing happens, do the insurance company give you money back? Probably not, right? So it's the same thing with the invested world. You can buy put contracts to hedge your positions inside of your portfolio. Now, we have another one where we have insurance. We spoke about this last week, right? We spoke about this last week. We spoke about how insurance is another great way to hedge stocks. How is that? You have things called indexed universal life policies. These are insurance policies that are not a guaranteeing you, but they're saying, hey, we'll give you, if the stock, they haven't a cap on it. If the stock market goes up by 12 or 14%, we'll give you this much money, but if the stock market collapses, you won't lose any of your principal. So by having some of the up and none of the down, that's a great way to hedge. Because let's think about it, right? Let's think about the market itself. And when you think about the market itself in 2008, when the market collapsed, when the market went down, the market was going up, do, do, do, then it collapsed. When it went down in 2009, it kinda came back up. 2010, it kinda came back up. Long story short, it took five years from the peak of 2008 for the market to rebound back to 2008 level, it took about five years. So if you were someone that had invested all the way up to the peak, it took you five years to earn your money back, unless you're investing on the downside, all that other stuff like that. So the thing about it is, if it takes that long, right, those are years that you could be taking in negative returns, negative returns. But the thought process behind that is, only bad years, you're getting nothing, right? You're not losing any money. But on the good years, you're giving some of the up, none of the down, as Tony Robbins would say in his book, Seven Ways to Master Money. Now, I know some people called in, called into the show. I think you guys four called into the show and talking about the talk bit. Oh, what if the market crashed? I had this conversation all the time. I don't have, my having a conversation with you guys calling in live. I don't know the number, it's exactly on top of my head. No, I do have it. 808-374-2014, 808-374-2014 is the number to call in, to speak live anytime you guys see me live. And definitely feel free to come in and chime in. I'd like to hear you guys talk about this. I know you guys probably heard the lines ringing earlier. And I was sitting back like, okay, what is going on with that? Then everything was ringing in here. But I thank you guys for calling in and checking in. This is a way that we can have a more engaging and interactive conversation instead of just having a particular guess on, right? So that's a great way to think about, I was having a conversation the other day and someone brought up the conversation of, well, you know what? Since the market's at an all time high, how about I just wait until it collapsed and then I can start investing? That's great. But my question is, if you can time the market like that, you're one of the elite people. A lot of people don't know that. We've seen hedge funds collapse, trying to do this exact same thing. It's people thought the market would collapse this year. I was one of the people that thought the market would collapse last year. It was people that thought it would collapse in 2014. And guess what? They're wrong. And if you had betted against the market over the last three or four years, you might be out of business or on your way out of business or lost a lot of money. So some people say, hey, well, I want to wait. Why buy it now? Why would I want to buy the market at an all time high? Why won't I just wait? Great question. But when will the collapse happen? Right now, the Dow Jones is up to about 22,000 points if I'm not mistaken. What if it continues to go up? Maybe it may go up to 30 before it collapsed. Maybe it may go to 25. And look at all those gains, you could potentially lose. My thing is use dollar cost averaging to curb that effect, which meaning that you just go back and you purchase it to the index overall. Purchase it to the index overall and you don't worry about it. And you just forget about it. The market could collapse and you just keep buying and keep buying. That way you kind of get out of that whole sequential risk, trying to time the market, right? I wouldn't. I wouldn't. Someone who was a novel investor, someone who just started investing to just wake up one day and just decide, hey, you know what I'm gonna do? I'm just gonna wake up and I'm just going to, what I'm gonna do is I'm just gonna wake up and tell everybody to jump straight into the market and try to time the market. It would be equivalent to, let's say we just heard a boxer match with Floyd Mayweather, right? One of the greatest, well, I would say probably the greatest boxers of the greatest boxers of our time and one of the greatest boxes ever. And then his last fight, he fought against Conor McGregor, right? You know, someone who was a more novelist fighter, never had a boxing match before. So you take someone off the street and they want to go straight into one of the best that ever did it. What do you kind of expect the outcome to be, right? Maybe it could be good, maybe it could be bad. I'm not a boxing expert. I'm not trying to turn into a sports show, but you have people that are professionals that have millions and hundreds of millions of dollars and sometimes billions and billions of dollars. Some people manage trillions of dollars. They have all the resources at their fingertips, meaning they can get into conference calls, they have meetings, they have connections, they have ties, they know everything before it's going to happen. And these people can't successfully time the market. They struggle trying to time the market. So why would someone who has none of this going on for them try to time the market? I wouldn't personally recommend someone to try that. That's why, because of some of the people who do it every single day, who have way more resources, they struggle with doing it. 90% of them can't do it. Why would I try to go in and tell someone to walk right off the street and just say, hey, just try to time the market? And when you look at it, 92% of the investors won't be the index anyway. So you might as well go with the index instead of going against the index. That's my take on it. Now let's go back into it. We spoke about insurance. Another one is volatility. Volatility of the market. You can invest VIX. I remember that one off the top of my head. VIX is a way that you can match volatility in the market. If something was to happen, like let's say we were to go to war, or we were to go through a financial crisis, the market will start to move like this, become volatile. It's a way that if the market starts to go on a downturn, it'll be very volatile. And when the market goes down like that, you have an increase in volatility. When you have an increase in volatility, you can purchase that. It's an ETF, or an investment instrument that you can make money off of, increased volatility into the market. So those are different ways. I just named out about six or seven of ways that you can look to invest against the market. I think the word is called contrary or contrary. I can't remember the exact word, but I think it's pretty much, it's someone who believes against the market. They don't think the market will do well. They think it's gonna go down. And those are ways that you can invest into it by an inverse ETF. That was number one. Number two, the good old precious metals, gold, is the safe haven for investing. People look at that, they say, well, you know what? This is a great safe haven for me to go around and invest, right? So when you look at that, you have gold as a precious metal. When people become scared, they run the gold. Now, Lars Kroger said in his book, keep an eye on Bitcoin, because he thinks the next time that the market crash, we actually can see a surge in Bitcoin, a cryptocurrency. Instead of people running to the traditional gold, they may run into a cryptocurrency. That's something to think about. Our next one is having cash on hand. When you are betting against the market, or you're preparing for a market downturn, keep money on hand so you can take advantage of the sale. If you're going into the store, it's awesome that the stuff is on sale, but if you don't have any money to purchase anything, guess what? You know, it does no good for you. So you can have save up cash. And what I said with that cash, when you're saving it up, let's say it may take a year, two, three, or four, when the market downturn will happen. It's not a question of will it happen, it's when. It may take three, four, five, 10 years for the next market downturn. And if that's the case, having your money in cash, you're losing money that we spoke about. Episode nine, invest or lose. Why? You guys are smart, purchase and power, inflation. Purchase and power and inflation can eat your money alive if you just sit it in cash waiting on the downturn. So some of the other ways I was looking at was, maybe you may want to look into preferred stocks. I have been looking into the preferred stock ETF as maybe a good place to hold cash. While you wait on the market downturn. So now interest rates, I don't want to get into preferred stocks, but just other instruments out there, instead of keeping it in a checking account or a savings account or a money market account where the interest rate is very low and inflation is three to 4% and your interest rate is not getting you even 1%, you're losing purchasing power. So somewhere you can kind of put your cash in the safe haven until it's time and ready to use. Now another one, we talked about put option, put contracts, what are put contracts? They're like insurance. Everybody out here pays insurance. If nothing happens in insurance, if nothing goes out in insurance, if nobody, if you pay your insurance and you don't wreck your car, the money just goes away, not goes away, but the insurance company keeps it, right? You're paying for insurance. Same thing you can do with a put contract. Let's say if you have $10,000 invested in a Google, what if Google just goes, what if Google turns into a blockbuster? 10, 15 years ago, blockbuster, what's the hottest thing going? Now, where is blockbuster? How we know that won't happen to Google. We can't see the future, right? So when I look at a Google company or I look at Google itself, I sit back and I wonder and I say, well, what if it disappeared? What are some ways I can hedge that $10,000? I don't wanna lose all my money. One of the ways you can do it, you can buy a put contract. So you can have a little insurance against your $10,000. You may end up paying a couple hundred dollars to save yourself in case of the market collapse, but it's a great way to hedge against yourself. All right? Another one, insurance. We spoke about this one, not episode nine. We spoke about this in episode eight. Episode eight, you have insurance, right? And with insurance, what you can do is, you can, with insurance, what you can do is you can invest into the index universal life. And what that does is, a lot of the insurance companies out there, they give you a cap of 12 to 14%. Right now, the market is up 14%. But if your cap is 12%, guess how much money you would get? 12%. So with that being said, that's another way, like right now I have an IUL. So right now the market is up 14%, my cap is 12. So this year, if the market continues on this point to point, I would make 12% return on my investment at the end of the year inside of the insurance policy that I have. The added feature to that is, if the market was to turn around and collapse tomorrow, instead of me losing anything, I just won't make anything. You know, versus where into my 401K and into my portfolio, if the market was to collapse tomorrow, my portfolio would lose value drastically. And what I mean by lose value, you don't lose money until you sell. Once you sell, it's done. But if you hold on to it and you know, I'm looking five, 10, 20, 30 years down the line, so I will keep investing anyway. But that's just an added feature. That's the way to hedge the market. What if the market collapsed? My insurance policy on great, my other places, not so much. And the last one was volatility, investing in the volatility. But guys, I hope that helped you and gave you some good points of hedging against the market and talking against the market. You know, not talking against the market. Right now we are at an all-time high. Congratulations for everybody there that started investing, that is investing. Thank you guys for tuning in to The Prince of Investing, right here on Thin Tech Hawaii. Don't forget to follow me on YouTube, Facebook, Twitter, Instagram, Snapchat, and all the other great stuff at the Investor Show. But as always guys, my name is Prince Dykes. I'm your host. And to the next podcast, TV show, episode, whatever you see me do, goofy and crazy around the world. Peace, be safe, I'm out. Thank you.