Let’s Talk… Investing Through a Recession!!
I had one of my early mentors describe investing in equities as building a mud pile. As the pile is building up, it keeps coming down to a lower level, but that level is still higher than the previous lows.
Here are a couple of pointers to remember if we start entering a recession territory. Keep in mind the first quarter was a negative GDP and technically a recession is two negative quarters of negative economic growth.
- Recessions typically don’t last long. They are often over before you know they start. The biggest drop in the market occurs as investors fear the recession. If we actually do enter a recession, the market may start going up as investors predict an economic recovery.
- The Fed raising rates to fight inflation gives them dry powder to spur the economy at some point in the future to get us out of a recession, if we have one.
- As Warren Buffet says: “Be fearful when others are greedy and greedy when others are fearful”.
- Consistency usually pays off. Invest the same amount each month. You’ll buy high, low and in between.
- Remember if you get out and go to cash, you have to determine when to get back in. In a historical sense, only a handful of days a year can make a year’s returns. Unless you have a crystal ball, it is pretty darn hard to predict when one of those days will happen.
At the end, keep your investing timeframe in check. Growth investments need to have a longer timeframe. Don’t invest cash that you may need, if you face an unexpected layoff.
The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations for any individual.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Investing involves risks including possible loss of principal.
