Survival Tips for the Coming Recession
Since Wall Street’s mini-comeback in early October has recovered some of the index’s hard losses from most of the first part of the year. It closed Monday at almost 4,000, up more than 10% since its worst hit two months earlier. This however is in sharp contrast to the current expectations of what the future holds in terms of recession.
Consider Morgan Stanley’s statement that the S&P 500 could drop all the way to a range between 3,000 and 3,300 during the first three months of the new year. That simply says it loses up to a quarter of its value from Monday’s closing level. The low end of that range would also be more than 35% below the record set in early 2022.
High-profile casualties in the current and predicted recession waves, include the once-soaring shares of Amazon which have slumped around 50% this year, while those of Tesla are down by more than 50% and Meta Platforms shares have lost about 60%. Meanwhile, energy stocks have somehow managed to sky-rocket. In this article we shall look at how to find the silver lining of profit in the storm cloud of recession.
Invest When Prices Are Low for the Future
During a recession, prices hit the bottom line turning strategic stocks into ‘potential growth stocks’. This, simply put, means that in a recession, for investors who are well informed, there is a huge chance to turn a cheap stock investment into a big time win in terms of profit.
statistics say if you buy stock in diversified companies, it will make you a lot of profit in the long run. Stock can be inconsistent in the short run, but in the zoomed out graph it generally goes up. You can’t predict the stock market but if you have enough patience’ the long term profits are worth the wait.
Once the recession ends and the value of the assets in your portfolio increases, the value of the contributions you made during the recession will increase accordingly.
Invest In At Least One Defensive Stock
Having at least one defensive stock in your portfolio may be the game changing move for your stability security in the market as an investor. For me, my go-to defensive stock would be real estate. A recession provides a good opportunity to purchase properties at depreciated prices. Investing in Real estate requires you to be prepared to invest in a project when needed with a pre- approved mortgage and dedicated home inspector. Otherwise, you may miss your opportunity. Look for sellers who are looking to sell/buy with comfortable terms, financial or otherwise.
Working on 401(k)
A common mistake made by most people is, they stop contributing to their 401(k) when a recession hits. This becomes a problem because the chance for dealing in discounted stock prices and maximizing your retirement plan contributions is lost.
Generate Passive Income
You can opt for the tools of creating incomes through passive investing and can cover living expenses. This would make your day job optional and would enhance your financial independence. Besides this, it would enable you to pursue your dream work regardless of its paying structures. You no longer have to pay for the costs of life insurance and disability insurance.
Go-Liquid
A recession is not the time to leave your money in banks or in the hands of the people from which it is complicated to collect. Take cash as it ensures that you are more protective of systematic failures. make precautions against everything that may become a complication to your financial stability at such a time.
Dollar-Cost-Average Your Investment
As with most recessions, you won’t see it coming until a sell-off in the stock market happens well in advance of a recession. When that happens, remember the first lesson: the stock market will usually begin to bottom well before the end of the recession.
Knowing that, investors can take advantage of a declining market through the dollar-cost averaging method of investing. If you make monthly contributions to a qualified retirement plan, you are already using the technique. But when the market starts to plunge, it is time to take advantage by increasing your contributions or starting dollar-cost-averaging in a non-qualified investment account.
Investor’s Note
Recessions are inevitable in the financial world. They can be unpredictable and may also have a significant impact on many people. But there are ways to ensure your investments are ready to face a recession.
Recessions and volatile markets are confusing times and financial-horrors, but if you’re investing with long term goals set in mind, come and stay informed. In many cases, the best thing to do may be to take it as a time to go through your portfolio thus if you have already taken the necessary precautions for the current predictions. So trust the market’s resilience and the diversification you’ve built into your long- term portfolio.