Tom Mosley:

Where should I invest in a recession? Most economists feel like we’re going to go through some level of recession in 2023, or if you’re listening to this YouTube or podcast at a later date, we may be about to enter into a recession at that time. And in a recession, you might need to do things differently than you’re doing just in a regular period of growth in the stock market.

Tom Mosley:

I’m Tom Mosley. I’m the CEO and president of Mosley Wealth Management in Anaheim, California. Thanks for watching this video. What I’m going to do is just simply address, where should I put my money in a recession? And there’s several places that you should do that. Number one, don’t ever forsake the bank. Now, a lot of people look at the bank and they say, “If I put my money in the bank, Tom, I’m just committing myself to not making any money.” Well, I’m shooting this at the end of 2022, the very beginning of 2023. And right now bank rates, CD rates, though they peaked and they’ve started coming down a little bit, they’re still higher than they’ve been in about probably 5, 10, 15 years. So, you might want to consider the bank.

Tom Mosley:

And in the bank, you always need money in the bank. You need to go buy groceries, you need to buy gasoline, you need to buy clothes. And if you’ve got children still at home, you need a lot of things. Okay? So, you’ll always need money in the bank. It’s money that’s immediately available. In fact, let’s look at it. “Is it liquid? Can I get my hands on it?” Yeah, I mean, it’s totally immediately available. Is it safe? Absolutely. If you’re in a bank that’s FDIC, what that means is it’s insured up to $250,000, watch this, per depositor. So, if you’re single, you’re insured for $250,000 for all of the money that you’ve got in that bank.

Tom Mosley:

If you’re married and both of your names are on the account, that account is insured for $500,000. So, it’s safe and it’s liquid. You can get your hands on it, unless you’ve tied it up in a CD or a 90-day, or one year, or maybe even a five-year CD, so you can get a little bit more interest rate. But it’s safe, it’s liquid, but is it really going to grow? Even in 2022, here at the end, the beginning of 2023, what we’re looking at is three-and-a-half to 4% CD rates. And we’re also looking at this time at 7% inflation rates.

Tom Mosley:

So, the good news about a bank is safe and it’s liquid. The bad news about a bank is it’s not going to grow. In fact, you’re losing. You say, “I’m not losing anything in the bank.” Well, you really are. You’re losing your purchasing power, because if you’re in the bank and inflation rate is even 7.1 like it was recently and you’re making, let’s say 4, you’re losing 3% a year to inflation and that will eventually diminish your purchasing power.

Tom Mosley:

But I want you to understand in a recession you need some money in the bank, because most people still eat during the recession and very few people go unclothed during a recession. So, you need those things to sustain your daily life and you need an emergency fund. And that’s a lot of times stashing that in a money market at a bank where you’re making a little bit of money, but you’ve got readily accessible money in case of an emergency, that’s important.

Tom Mosley:

Let’s talk about how much. A lot of the prognosticators say, “Keep one year of income in a money market in the bank as an emergency fund.” Sounds good. Now, 15 years ago when people were saying that a lot, there’s only like one guy on the radio who’s got 20 million people who listen to him every day, who continues to say that. But when people were beginning to say that 15 to 20 years ago … That person, by the way, is not an investment advisor and he’s probably not noticed that you can’t make any money in the bank. 15 or 20 years ago, in fact, about 12 years ago, you could put your money into a money market with ING, which was known as the orange company, and you can make 7.2% interest per year and you could write a check on it three times a month, as long as that check was $250,000.

Tom Mosley:

So, if you could make 7.2% interest by leaving it in a bank, in a money market, that would be a great thing. But last week the money markets were paying 0.3%, nothing anywhere close to 7.2%. The bank is good because it’s liquid, it’s safe, but you’re not going to make any money in the bank. So, what do people do? A lot of people, because they can’t make any money in the bank, they have over the past 13 years as the interest rates in the bank have gone down and the stock market for 13 years has had a dramatic, unprecedented 13 years, have basically gained since 2008 and the financial disaster. Until 2022, last year, where the S&P was down 20, the NASDAQ was down 30, the Dow, which is only 30 companies, but it was only down a little over 10, but the market was down last year.

Tom Mosley:

So, for 13 years, up until then though, a lot of people who couldn’t make money in the bank would put their money into the stock market. Now, the good news about the stock market is, it can grow. I mean, it did for 13 years. Yeah, we got a nose bloodied last year. But overall, the stock market grows. So, will it grow? Let’s put a check mark. Yes, it will grow, but let’s put a plus and a minus on it, because sometimes it grows, most of the time it grows, but sometimes you get your nose bloody with it. So, there’s growth there.

Tom Mosley:

There’s liquidity. You can sell your stock, sell what you’ve got invested in the market. The problem is, a lot of people wait till the market goes down and they say, “Well, the market’s down, let me sell.” And then when the market starts to go up like it has for 13 years, they say, “Let’s buy.” Those are really the opposite of what you should be doing. When the market’s down, that’s a great buying opportunity. When the market’s up, that might be a time to sell. So, it will grow most of the time. It’s liquid, but is it safe? We found out last year, no, it’s not safe.

Tom Mosley:

So, what’s really one of the factors that’s really driven the market growth since 2008, 2009, actually, I know exactly the date. It was March the 9th of 2009, where the stock market hit the bottom and then the Dow Jones was around 6,300 at that point and it grew up to 38,000. I mean, it was six times what it was 13 years later, than what it was in 2009. And that growth and not being able to get any money in the bank that we talked about earlier, that growth in the stock market drove a lot of people to be in the stock market that maybe shouldn’t. And that’s why when it’s down, they want to sell. When it’s up, they want to buy. And it’s just the opposite of what you should be doing.

Tom Mosley:

So, let’s review a little bit. The bank. Is it safe? Yes. Is it liquid? Yes. Will it grow? Well, no. All right. The stock market. Is it liquid? Yes. Will it grow? Most of the time. Is it safe? No. So, there’s something negative about all of that. Now, let’s talk about an income annuity. And I know I just said a four letter word to a lot of you, but an income annuity is something that you really hold onto in a desperate time. For instance, a lot of people come into my office and they say, “I don’t like annuities. I would never have an annuity.” And then we start talking to them. We say, “How much is your social security?” And they tell us X amount. And then if they’re married, we say, “How much is your social security?” And then he or she will then say, “That’s my social security.” Those are income annuities.

Tom Mosley:

An annuity is just something that’s going to pay you every single month for as long as you live. That’s what an annuity is. And then, we continue to talk to these people who hate income annuities and we say, “Do you have a pension?” “Yes, I have a pension.” “Okay, let’s look at your pension.” What’s a pension? It’s an income annuity. In fact, over 90% of them are backed up by insurance companies who put the money into, guess what? An income annuity.

Tom Mosley:

Now you say, “Well, what if I have enough social and with my spouse’s social especially, and then I have a pension, and what if I have enough income coming in?” You probably don’t need an income annuity. Now, let me tell you why. An annuity’s safe. It’s even got insurance up to $240,000 in California. It’s going to grow. Some of the annuities that we have that we use with some of our clients are growing at 5, 6, 7, even 8% per year, over the past 10 years. But an annuity is not liquid. The bank’s liquid. The stock market’s liquid, but the annuity is not liquid. So, that’s the issue. You only need to put enough money into an income annuity that you need for income.

Tom Mosley:

So, if we add up your social, and then if you’re married, we add up the two socials. And if there’s no pension and there’s a gap many times in building a good plan for you in a recession, so you’re not going to run out of money, is to put it into an income annuity. A particular kind, not a variable annuity. Variable. What’s the word, variable? Up and down all over the place. But a fixed, indexed annuity, so that when the market grows, you grow within that annuity.

Tom Mosley:

So, let’s review. A bank. Is it safe? Yes. Is it liquid? Yes. But will it grow? No. A stock market. Is it liquid? Yes, I can sell at any time. Will it grow? Almost all the time over a period of time. But is it therefore, safe? We found out last year, no. An income annuity. Is it safe? Yes. Will it grow? Yes. But is it liquid? No. So, there’s two things positive and one thing negative wrong with all three of these.

Tom Mosley:

Now, let me present something to you that might be earth-shattering. Maybe instead of all one or all the other, or none of the other, maybe building a plan for you in a recession so that you don’t run out of money and you don’t run out of income and you’re able to retire even during a recession, you can enjoy what’s going on in your retirement. Maybe you use some in the bank, some in the stock market, and some in an income annuity, if you need one. Wow, what a novel concept. Instead of putting everything in one basket, maybe spreading those things together with a plan.

Tom Mosley:

Now, if I’m going to build you a house, I would not stack up 500 doors of all kind of different sizes and build your entire house out of doors. If I’m going to build your house, I would not stack up just plywood after plywood after plywood and build you a house all out of plywood. If I were going to build you a house, I would not stack up millions or hundreds of roof trusses and just build your house all out of roof trusses.

Tom Mosley:

But in your house there would be doors, there would be windows, there’d be plywood, there’d be sheetrock, there’d be roof trusses. You understand what I’m saying? There would be something of every kind for the purpose that that particular item was needed. And that’s exactly how you build a retirement plan that will last you through a recession. You build some in the bank for emergencies, some in stock market for long-term growth, but some in income producing annuities like social pensions and maybe in an additional annuity, so that you have enough income that will last you as long as you live.

Tom Mosley:

Hey, if you’re interested in talking to us at any time, you can get ahold of us by emailing us at info@mosleywealthmanagement.com. You spell Mosley, M-O-S-L-E-Y. I always point that out because my mom, when she married my dad, had an extra letter in hers and she was a Mosley. I’m a thoroughbred. Info@mosleywealthmanagement.com. Or you can pick up the phone and call us if you’re interested, 714-421-4288. 714-421-4288. Where should I invest in a recession? Let’s talk.