This Is Graham Stephan's Investment Plan for 2023. Will It Work for You?

As investors, we're always learning.

Graham Stephan is a real estate agent and investor, turned YouTube financial influencer. He's known for sharing tips on everything from learning to budget to cryptocurrency. Here's how he says he plans to invest for 2023.

Inspiration

Stephan makes no secret of the fact that he takes investment inspiration from the late David Swensen, a man who dramatically increased Yale University's endowment fund by sticking with two core principles:

1. Don't put all your eggs in one basket.
2. The opportunity cost of not investing in stocks is a bigger risk than investing.

Based upon those principles, here's how Stephan plans to allocate his investments this year:

• 35% equities
• 35% real estate
• 22% treasuries
• 4% alternative assets
• 3% Bitcoin and Ethereum

Asset allocation

Stephan says that when he was in his 20s he put all his money into real estate. He would save up enough money to buy a residential property, fix it up, and rent it out. Every penny he had was tied up in seven properties. In other words, all his eggs were in one basket.

"The risk with tying up your assets in one type of investment is that it can force your arm into liquidating when you are least prepared," Stephan said.

You'll notice that his current allocation is diversified. That way, if one sector bites the dust, other assets can carry the portfolio as a whole.

It's all about asset allocation.

The big, scary stock market

Stephan understands that investing in stocks scares some people right now. After all, the market closed 19% down in 2022. The last time stocks tanked like this was 2008. However, he says it's important to look at the big picture.

Here's how he explains it: "When you look at stocks over a longer time horizon of 20-30 years, stocks have never lost money. The return on the S&P 500 has been positive over any 20-year rolling period, and the least it's ever been was in 1948 at 4% -- not much different from a Treasury bill. But most times, the stock market has had an average return of 7%-10%.

A fascinating statistic

Stephan says that it's in the short term that holding stocks can be uncomfortable. However, he offers a fascinating set of statistics.

• If you buy and sell within one year, you have a 73% chance of making money.
• If you wait and sell in the second year, there's an 80% chance of making money
• If you wait and sell in the fifth year, the odds raise to 90%
• If you sell in the 10th year, you have a 97% chance of making money.

It is with that mindset that Stephan invests and forgets about it until 2040.

Switching up how he invests in real estate

You'll notice that Stephan has allocated 35% to invest in real estate. Instead of buying multi-family properties like he once did, he's turning his attention to commercial real estate this year -- space that a business might use for the next five to 20 years.

He's attracted to the fact that commercial property prices have already dropped 13% from their peak. He also appreciates that tenants are responsible for paying taxes, insurance, and maintenance fees. As a residential landlord, he was responsible for everything. Investing in commercial real estate will allow him more time to focus on other projects.

Assets influenced by different factors

It's not enough to invest in stocks and bonds, two assets heavily influenced by Federal Reserve rates. Stephan feels most comfortable investing in some assets unimpacted by those rates.

For example, Stephan invested in a Ford GT and Tesla Roadster. So far, the GT is up 30% since he purchased it, and the value of the Roadster has done better than his Tesla stock holdings.

That said, Stephan does not advise anyone to go all in on exotic cars or watches. He's used less than 5% of his net worth on such investments.

Like all of us, Stephan will get some things wrong and others right as he continues to invest. What's so appealing about his style is the way he adopts new strategies as he learns what works for him.