How to Invest Wisely During a Recession – Tips and Tricks

By
Industry Observer

The economic downturn has left its mark on most of us. While some have suffered more than others, most of us have felt the pinch in one way or another. As an investor, how can you protect yourself from the potential damage of a recession? How can you minimize your losses and be prepared for when time is on your side again? Keep reading for four tips to invest wisely during a recession.

  1. Do you have to be rich to invest?

Investing doesn’t have to be complicated. You don’t have to have a lot of money. In fact, if you have a little money to invest, you can potentially have a higher return on investment than someone who has a lot of money to invest.However, the most important aspect is that you can afford to invest and stick to a disciplined plan. 4 Ways to Invest During a Recession and Remain Safe 1. Do your homework. Before investing, you need to do some research. Make sure you know who is buying, how much is being purchased, and what prices the purchases are being compared to. It’s important to do the bare minimum research necessary to determine whether the market is a viable one to invest in. The mere fact you skip through this research doesn’t mean you are guaranteed to succeed—but having the possibility does increase the odds of you making money in the future. Don’t fall for the hype and superficial statistics floating around the internet. Read books, learn to speak with contractors, or attend local real estate events. No matter what you choose to do, be able to back it up with solid research so you make good, solid investments. 2. Change your perspective. Instead of viewing real estate as something that works against you, think of it as a way to make money. In fact, by investing in real estate, you are building your wealth. The recession is not necessarily something to fear. In fact, that’s why it's such a great time to invest! Real estate offers another chance to diversify your money, increase your retirement savings, build up equity, and earn a yield—in addition to all the other benefits provided by real estate. Don’t think of the recession as something that is devastating to your investment strategy but as something that is a product of the market and will eventually lead to greater prosperity. 3. Don’t buy every house.

  1. Should you buy stocks or mutual funds?

There are a lot of factors to consider when deciding whether to invest in stocks or mutual funds, but the key is to remember that they’re both speculative investments. They’re great for people who want to invest in the long term, but it’s important to remember that you can lose money when you invest in the stock market.The number two rule of real estate investing when the market is down is to cash flow. It doesn’t matter if the housing market is up or down, the economy is solid and cash is flowing in the right direction—whatever's happening, cash flow is king! Then, there are things to keep in mind when buying property for investments that you can hold onto for the long run. Hopefully by reading this article, you can keep one foot on the roller coaster of a recession to guard against loss and maximize your gains.

  1. How do you start investing?

If you want to start investing, the first thing you need to do is decide how you’d like to invest. There are three main options: 1. Exchange-traded funds (ETFs) – these funds invest in a variety of assets, such as stocks, bonds, or commodities. 2.Stocks/bonds – With these investments, the investor buys interest, and the manager (or exchange) buys the underlying security. Investment portfolios now make up approximately half of all equity investments. During recessions, both types of investments can be very effective. 3. Traditional stocks/bonds – Owning investment property like a single family home, apartment building, or commercial building promises consistent cash flow, while also offering great risk protection. Protecting yourself from downside risk of real estate investment is significantly better than investing in an unregulated market, where there are too many options and there’s less short-term focus. So, which choice is best? There is no right answer. It depends on each investor’s specific risk tolerance, investment goals, risk tolerance during a recession, and overall capital availability. Choose whichever option has the best risk protection. Besides which, when recessions are in your lifetime, you probably already have some experience investing. Just make sure you’re not training the wrong skills. Frosted tips from today’s recession could become broken links tomorrow. Follow these guidelines to invest safely. Don’t be part of the 1% that makes their money from raiding the 401k. Protect your assets. Don’t let an annual check rate rise over 15%! Repeat after me: I am NOT a retiree looking for a 401k that will increase my income. (Please, somebody correct me with that meme.) I am an investor looking for a risk-free, guaranteed income. Protect your family! Invest in real estate.

  1. How do you choose your investments?

Choosing the right investments is a tricky part of making money. You could make a lot of money off a lot of great investments, but you could also lose a lot of money off a lot of bad investments. Here are three ideas for how to choose your investments: 1) diversify.As the saying goes, “don’t put all your eggs in one basket.” With a global economy, we’ve all decided that a basket of one is safe enough. While that’s good advice, it's not always possible. Studies show that at least half of our overall portfolios should contain a mix of different asset classes. You could invest in 10 different stocks, 15 different bonds, and eight different mutual funds. That pretty much guarantees to put you into a situation that mixes up your risk. However, slowly increasing your investment mix isn’t enough to reduce your overall risk. That’s where diversification comes into play. When you diversify your portfolio, you spread out the risks so that your portfolio isn’t as exposed to one single catastrophic loss. 2) diversify at the margin. In 2019, the stock market experienced a lengthy bull market. As a result, people made a lot of money. However, for a while, that money couldn’t last forever. That meant that the people who had managed to get in with the rich man’s stocks saw their gains shrink as the market eventually reversed. Of course, if you’ve got a lot of money, you can’t be affected too much. However, with small amounts, you aren’t as certain that you won’t suffer a big loss. When you invest for the long-term, you put yourself in the best position to benefit from a reversal. 3) wait it out. Relief is coming. While there aren’t any guarantees, you might get a reprieve from economic downturns. Although it’s not easy to invest when the mainstream news is focused on protests and investigations, you should probably be more patient during recessions. Most people who follow the news see the spectacle, but they shouldn’t go in expecting to make money right away.

  1. What are the best investment opportunities for me?

The easiest way to figure out what investment opportunities are right for you is to consider what you’re passionate about. What are your hobbies? What are your interests? What are you interested in? What are you already spending money on anyway? Once you start to figure out what you’re passionate about, you can start looking for investment opportunities in that space.A powerful way to define your funds is to think about what you want to gain from each investment. Depending on theazardies of your investment goals, you can consider several things to consider — such as the capital appreciation, growth potential, and expected return. In general, the first investment you make should have a clear ROI (return on investment). Investing is not like regular business, however. Money invested goes directly into an account and you don’t usually see the profits until a set number of years after you made the original investment. In the short term, investments can have low returns because you can lose money on the trade. In the long term, even legit investment opportunities can be run with high risk when there is no guarantee of a higher level of returns. Using a stock market calculator before investing helps to ensure that you will not lose all your money. Investing risks can be minimized through a lot of research and proper analysis so you can take advantage of the offers of investment companies. Pump up your game as an investor if you’d love more of these tips to invest wisely during a recession: ♣Remember to keep an open mind. Economic recessions affect everyone equally, and what we think of as a positive or negative experience can have an impact on our long-term investments.For example, a lot of people are seeing the positive impact of the Great Recession, so they’re willing to put money into places where the majority of people do not agree with them. That’s a double-edged sword. The more viewpoints you have, the more decision making flexibility you’ll have and the easier it will be to incorporate different points of view. ♣Don’t be afraid to research investment opportunities.

Comments (3)

Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH
CRS

Thanks for sharing Emily! Great information!!!

Choosing the right investments is a tricky part of making money. You could make a lot of money off a lot of great investments, but you could also lose a lot of money off a lot of bad investments. 

Nov 02, 2021 04:36 AM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Excellant tips, and yes diverifying is the key. . Have a great Taco Tuesday, make it a productive one.  Thanks again for the post. bill

Nov 02, 2021 06:03 AM
Rocky Dickerson
Realty One Group - Las Vegas, NV
Superior Service!

Hey there Emily! And when you consider tools like starkers and CRTs you may find even greater investment opportunities

Nov 02, 2021 05:15 PM