Investing During A Recession

Investing during a recession can be a boon as prices are discounted across the board. You can buy your favorite companies and hold for the long-term.


There are many reasons to invest during a recession. Recessions offer opportunities to buy assets at a discount, as many people are forced to sell during tough economic times. Recessions also provide a chance to invest in companies with strong fundamentals that will weather the storm and come out stronger on the other side.

Of course, there are risks to investing during a recession. The economy may not rebound as quickly as you hope, or your investments may not perform as well as you expect. However, the potential rewards of investing during a recession make it a strategy worth considering.

Here are some key reasons to invest during a recession:

1. Asset Prices Are Discounted

During a recession, asset prices tend to fall across the board. This provides an opportunity to buy assets at a discount. For example, Amazon is down over 35% from its highs. If you believe Amazon will continue to grow in the years to come, you can purchase stock at a lower price.

2. Invest in Companies with Strong Fundamentals

A recession provides an opportunity to invest in companies with strong fundamentals. These companies have a competitive advantage and are more likely to weather the storm and come out stronger on the other side. These are often referred to as blue-chip companies - ones who have operated though previous recessions and come out unscathed.

3. Recessions Offer a Chance to Rebalance Your Portfolio

A recession can be a good time to rebalance your portfolio. If you have a diversified portfolio, you may find that some of your investments have lost value while others have held steady or even increased in value. This provides an opportunity to sell the losers and buy the winners, which can help you improve your overall returns.

This typically occurs during tax-loss harvesting season (December) where you can apply any capital losses against your owed taxes.

4. Economic Downturns Dont Last Forever

Its important to remember that economic downturns dont last forever. While it may be painful to watch your investments lose value in the short-term, the economy will rebound. When it does, youll be in a position to benefit from the upturn. On average, a recession lasts 10-months. However, the indicators used to gauge if we are in a recession are backwards looking so by the time the news hits, we may already be several months into a recession.

5. You Cant Time the Market

Trying to time the market is a losing proposition. If you wait for the perfect time to invest, youll likely miss out on the best opportunities. By investing during a recession, youll be in a position to take advantage of the rebound when it comes.

Of course, there are risks to investing during a recession. The economy may not rebound as quickly as you hope, or your investments may not perform as well as you expect. However, the potential rewards of investing during a recession make it a strategy worth considering.

How Can You Weather the Storm?

Make informed investment decisions that align with your goals and don't follow all the negative headlines constantly. You can build a portfolio for free at Investipal using low-cost ETFs to diversify your risk and set your self up for success out of this recession.

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