It’s no secret that we are entering into a recession. Interest rates are rising, stocks are falling, the prices of goods are going up, and the average American is beginning to feel the pain. Markets like these cause a lot of fear and panic and people become irrational. Doom and gloom is the most present mindset in the market. As the entry costs of proven assets continue to fall, it is a wise move historically to buy the market dip. For example, in 2009, those who went out and bought real estate saw immense profit over the following years. Sound investments are always sound investments in good or bad markets. If your plan is to buy and hold long term, we are entering a market where those quality investments will be issued at a discount so to speak. Don’t miss this opportunity!
Strong investments during a weak market
Strong investments are strong regardless of the market. Good or bad, it doesn’t matter. This doesn’t mean that good investments won’t take a dip during bad markets and times of financial hardships. What it does mean is that over the course of time, the value is there and returns will undoubtedly be realized. Real estate, for example, is a strong investment vehicle. If you look at the track record of real estate over the course of history, the value has steadily increased. The 2008s and 1930s are illustrated as valleys during economic downturns, however, real estate has and will continue to appreciate over time. Getting into a good real estate asset that you can get rented during times of economic hardship is like paying for McDonald’s but getting a 5-star steak dinner over time. Tenants will pay you while you wait for that appreciation to either go and sell or pull out equity on a refinance.
In a similar way, the historical appreciation of the stock market has been largely steady. There will be ups and downs during different periods of time, however, if the asset you buy is strong, you will see results. Economic downturns are meant to push out the weak companies and investment vehicles. So many times we’ve seen overinflated companies and investment vehicles such as crypto pop like a bubble and come crumbling down. These aren’t and never were strong investments. They were get rich quick strategies that are pumped and dumped regularly. The sooner you understand there is no get rich quick the better off you’ll be from wasting a lot of money on a not so quality investment. For me, the S&P 500 ETF known as SPY is a strong investment that I will continue to put money into especially during bad markets. I know that this ETF encompasses the broad market as a whole and I know that historically the market has increased in value over the course of time, so I view buying more of it during a market crash as a “sale” so to speak. There are many stocks out there that serve as sound investments. Gold, silver, precious metals, and utility stocks are also great things to invest money into during a recession. These investments help hedge and diversify your risk.
Keeping cash liquid for a bad market
The goal for anyone is to cash out of their investments during great markets where the values are sky high and then reinvest during recessions where those same strong investments are at a discount. That is why it is key to have liquid cash handy during recession type markets. Obviously, you don’t want to sell your strongest investments for cash at the bottom, so the key is to liquidate or keep enough cash prior to these bear markets to buy more of the assets that have helped you reach financial freedom. Many people panic during recession and liquidate their sound investments for a loss rather than hold them to cash out with gains. This is a common mistake that needs to be avoided. Getting into the buy high sell low trap is a way to lose a lot of money over time. Stay faithful to the principle of not buying high unless your plan is to keep something long-term, and to never sell low to liquidate cash for a loss. Keep a healthy cash reserve to ensure you have the funds to multiply your net worth during times of opportunity.
Fear is the ultimate equalizer
Fear and fear alone is the ultimate equalizer in the market. So many people, even the strongest of investors, may find themselves reacting to things out of fear during the worst of markets. Don’t give in to emotion! Stick to your principles and keep putting money into your sound and strong investments when the time is right and wealth is a certainty!