Recession is a scary word, it is plastered on every financial news media site as soon as the Dow Jones drops by anything exceeding .5%. The doomsayers start posting click bait articles “OMG guys it’s over, the recession is here!”. But as we all know the doomsayers are wrong much more than they are right. However what happens when they are eventually correct? As the old adage goes “a broken clock is right twice a day”. The business cycle is inescapable and eventually the economic growth will stall out and eventually we will be in that dreaded phase “economic recession”.
However as scary as a recession sounds the scary part is the reactions that follow it. Despite what people will tell you, it’s almost possible to tell if a recession is going to happen until it actually happens (i.e. 2 straight quarters of economic contraction). People like to think they can predict the bear market but most of the time optimism will make a stock market bull out of anyone. When the bottom does fall out people start selling like crazy. Stocks, bonds, CD’s, gold, silver, nothing is safe from the panic selling that follows an economic downturn.
But once you realize that the recession is here and the news media seems to think the sky is falling this is best time to buy. As Warren Buffet once said “be greedy when others are fearful and be fearful when other are greedy”. Basically, he is saying to start buying when everyone is selling. That’s right, your smart ass contrarian attitude will actually come in handy for once, instead of annoying anyone and everyone around you.
Also the quality that will help you immensely is to stay calm and realize that the market will rise back up eventually. It would be incredibly helpful to engage in some dollar cost averaging and start to lower the cost average of the stocks you own. So that when the market rebounds you can collect the benefits and stack those massive gains. In addition, you may want to think about waiting before getting into real estate. Unlike stocks and bonds, real estates are considered to be a “lagging indicator” basically meaning that it will most likely drop after the stock market does. Consensus seems to be 2 years but of course in the world of financial gains, nothing is certain.
There you go, as always it is important to stay vigilant for good deals. However don’t panic sell when things go bad. Maybe just get some easy Vanguard funds or ETF’s like $spy that allow you to just set it and forget it. But for our more adventurous readers, stay in the zone and do not react quickly.
DISCLAIMER: I am not a financial advisory or investment professional and this post or any post on this site should not be considered financial or investment advice. Any financial decisions should be made with careful consideration. Also these financial decisions with the input of an investment or financial professional.