By Harrison Floyd
Some people think it’s not a good idea to invest when the economy is in a recession. But that is only one point of view, and it doesn’t mean you shouldn’t invest at all. In fact, there are some strategies that work better during this type of economic cycle.
Investing during a recession has its risks and rewards. Technically, more millionaires are made in bear markets & recessions than during bull market cycles. Why? If you invest during a boom, you’re actually more likely to lose money because you are already in the top side of the swing, not the bottom. True growth always starts at the bottom.
This mindset, waiting to get in when you see a boom, is a big part of the problem with the culture of cryptocurrency. We see a lot of people getting into the space when Bitcoin is high, at 50k – 60K, but cash out and call crypto a scam when the market drops below previous support levels.
To determine how to invest during this recession, we need to look at what happened in past recessions and how people reacted to them. Those that were successful kept the mindset that there is no such thing as a “bad time” to invest.
Some of the best products to invest in include stocks, bonds, exchange traded funds (ETF’s) and digital assets. Those who become new millionaires during bear market cycles took the approach that the market as on sale. This strategy can be beneficial because products are more affordable and are good deals if they have historically been good investments. Stocks can be risky, but it is also the most lucrative way to invest when the market starts to make the turn up. Index funds, with a long time horizon, have been one of Warren Buffett’s preferred strategies.
Traditionally, investing in bonds has been a safer way to invest because they are less volatile than stocks and provide a steady return over time. However, the current bond market seems to be a part of the problem and cause of this recession.
Digital Assets are also an option, but they are highly speculative. Cryptocurrency is highly volatile and has not been around for long to know what a good investment will be. A good way to get into the space is mining. This is where you invest in hardware that validates transactions on the blockchain, and you are paid for the hash power. We have found this is the best way to develop passive income in the space.
Investing, with the right mind set and strategy, provides an opportunity for personal and financial growth. But it also comes with great risk as well because there is no guarantee that the price will go up or stay stable. Whatever you decide to do, have a plan, seek advice, and have the right mindset.