Ep. 37 - Recession Proof your Life
The markets and the world have been volatile as of late. Wednesday alone brought 5-10% swings in some stocks, as the Federal Reserve closed out their meetings in the afternoon. As per usual, the debt ceiling increased another $2T and tapering ‘may’ happen in 2022 at three different intervals. So basically, nothing happened, and we can just continue printing money and acting like it’s all okay.
However, it’s easy to get caught up in the hype – becoming euphoric when your investments are flying, and stingy when they seem to be going to zero. But the reality is this: your investments will go up and down in the short-term, and gradually increase over the long-term [if you hold quality companies]. But there will inevitably be another recession similar to 2008, and potentially even more severe. So, we must be prepared but also not paranoid. Tough balance – so how’s it done? Here's what I'm aiming for.
A portfolio of small bets.
I’ve been giving this a lot of thought lately. I don’t want to touch my investments for years, while continually adding to them weekly/monthly, and affording a comfortable and fun lifestyle. The best solution I’ve landed on is this: accumulating a portfolio of small bets and having strong cash-flowing businesses. This creates anti-fragility. If one business fails – so what? You have income coming from another project. Numerous projects, with numerous income streams is the goal. Income isn’t tied to one company or one industry, it’s varied. This can be a product of numerous clients, numerous projects [SaaS projects for example], options trading, private investments, etc.
This is the main reason I’ve decided to learn how to code. The idea of creating income through projects that I can build is invigorating. It also lowers the stakes. You don’t need venture funding and $100k of savings to launch a website. A portfolio of small bets may look something like this:
- Freelance Clients [3-5 different ones]: $15-20k/monthly
- Options trading: $2,500/monthly
- Project 1: $500/monthly
- Project 2: $4,500/monthly
It’s robust and recession proof. If one goes bust, I still have another income stream. Plus, it allows for more accumulation of pre-tax dollars to invest freely in asymmetric opportunities.
Inflation proof.
Further, the best way to beat inflation is to have a cash-flowing business. It’s hard to ask for a 15% raise annually from an employer, however raising prices on your services and/or product en masse is standard. Plus, if you’re delivering quality services and/or products your customers will not care – trust me. This extra income can then be diverted into inflation resistant assets such as Bitcoin, quality stocks, and real estate, which create more cash-flow. And so, the fly-wheel continues.
Closing.
I think too many people think of starting a business as this daunting and be-all-end-all way of life. Of course, if you poured your life savings and took on major debt to make a project work and it failed, that would be devastating. However, the better option is to just start shipping a product/service and see if it sticks. If so, great. If not, no problem because you spent a couple months working on it, only a few hundred dollars, and you learned something from it.