My Investing Plan for 2025

Summary

As we approach 2025, it's crucial to consider the impact of political changes and economic policies on investment strategies. The stock market has seen strong growth in 2024, but with high P/E ratios signaling potential risks. Going into 2025, the new administration under Donald Trump may bring tax cuts, deregulation, and tariffs, which could affect both domestic and international markets. The video outlines the importance of diversification, cash reserves, and a long-term investment approach while considering exposure to equities, crypto, and other assets. Adjustments to the portfolio will be necessary to navigate potential market corrections and economic uncertainty.

Takeaways

• 😀 2025 investment strategy should factor in new presidential policies, potential tariffs, and interest rates.
• 😀 The stock market in 2024 showed unusually high returns, with S&P 500 and NASDAQ experiencing 27% and 30% gains respectively.
• 😀 The S&P 500 is trading at a higher-than-average price-to-earnings (PE) ratio, indicating a potentially frothy market.
• 😀 The investor's strategy in 2024 included regular contributions to their portfolio, buying stocks with conviction, and minimal trading.
• 😀 Despite predictions, tech stocks continued to perform well in 2024, and the election year turned out bullish for stocks.
• 😀 The investor maintained 90% of their portfolio in equities, with 5-7% in crypto and a small amount in bonds or cash.
• 😀 Going into 2025, the investor plans to diversify their portfolio further and consider holding more cash due to high market PE ratios.
• 😀 Trump's economic policies for 2025, including battling inflation, lowering taxes, and cutting regulations, may influence market performance.
• 😀 Potential tariffs under Trump's administration could impact both domestic and international industries, raising prices for consumers.
• 😀 While sector performance under different presidencies varies, it’s important to remain level-headed and stick to a long-term investment plan, regardless of political shifts.
• 😀 The investor recommends having a small exposure to crypto (Bitcoin, Ethereum), especially given its recent strong performance and the potential for future capital gains tax relief.

Q & A

What was the main investing strategy in 2024?

The main investing strategy for 2024 was to regularly contribute to the investment portfolio, focus on buying individual stocks with strong conviction and research, and largely remain passive, allowing compounding and investing to do the work.

How did the stock market perform in 2024?

In 2024, the stock market saw unusually high returns. The S&P 500 started the year at 4742 and reached over 6000 by the end of the year, showing a 27% year-to-date gain. The NASDAQ had a similar performance, starting at 14,765 and finishing above 19,000, with a 30% year-to-date gain.

Why are the current price-to-earnings (PE) ratios concerning?

The PE ratio for the S&P 500 is currently around 25, up from 21 a year ago, while the historical average is typically between 15 and 20. This indicates that the market is trading at higher-than-average multiples, which can be a sign of overvaluation or a 'frothy' market.

What is the current allocation of the speaker's portfolio?

The speaker's portfolio is primarily composed of 90% equities, 5-7% crypto, and the rest in bonds or cash. This reflects a high risk tolerance and a long-term investment outlook.

What changes might be made to the portfolio in 2025?

In 2025, the speaker plans to ensure their portfolio is more diversified by potentially holding more cash and shifting some investments from growth and tech stocks into more defensive stocks like staples, depending on market conditions.

How does the new presidential administration impact the investment strategy?

The incoming presidential administration under Donald Trump could affect investments through potential tariffs, tax policy changes, and efforts to lower inflation. However, the actual impact of these policies is uncertain and may not significantly influence the stock market in the long term.

What is the relationship between tariffs and stock prices?

Tariffs impose a tax on imports, which increases the cost for U.S. companies importing goods. This can lead to higher prices for consumers and reduced profits for companies reliant on imports. However, companies in industries protected by tariffs, like domestic agriculture or manufacturing, may benefit.

How do tariffs affect consumers and the economy?

Tariffs generally lead to higher prices for goods, which can reduce consumer spending in other areas. In the long term, they may shrink the economy by reducing investment and work. They can also lead to inflationary pressures in the short run.

What is the expected impact of Trump's economic policies on inflation?

Trump's policies aim to battle inflation, primarily through increasing domestic oil and gas production. However, there are concerns about how this can be reconciled with his goal of lowering interest rates, as these two objectives can sometimes be at odds.

What is the speaker's stance on cryptocurrency?

The speaker maintains a small exposure to cryptocurrencies, primarily in Bitcoin, Ethereum, and Solana. They believe cryptocurrency, especially Bitcoin, is a viable long-term investment, but also emphasize the high volatility and risk associated with it.