How To Invest During A Recession

As more and more people are asking if we are in a recession, now is as good a time as any to do some basic financial housekeeping to get ourselves ready.

From adulting after graduation to paying taxes, we admit that these grown-up sounding decisions may not always be the sexiest ones to make. But sometimes you reach an age in your early-to-mid 20s where a good night’s sleep is worth its weight in down pillows, and being able to rest easy - even during a potential recession - is priceless.

While the process of adulting may feel like an ongoing one, I think we can agree a big part of it is saving money for retirement. A recession - even the thought of one - can certainly put a damper on those plans.

After all, recessions are known for job loss, declining incomes, disappearing sales, and a whole host of other not-so-fun-sounding indicators (significant economic shrinkage!).

With those declines - especially if we are affected personally - it’s hard to think about spending on the future when our immediate needs are our top priority.

Still, the future isn’t going away. What’s more, a recession can also be a unique opportunity to further strengthen your investment portfolio. To that end, we’re sharing a few tips today about how to think about investing during a recession.

We do recognize that everyone’s economic situation is different, so please consider the following as general suggestions, not financial advice.

4 Strategies For Recession-Proof Investing

1. Don’t Try And Time The Market - Some recessions last as little as two months. Other recessions last ten months or more. As is always the case with investing, trying to time the absolute best moment to buy or sell is a fool’s errand - and we’re working on adulting here. Given that a recession is an even more sensitive period, now is the time to commit to dollar-cost averaging and put a manageable amount of money in over regular intervals.
   
   
2. Adjust Your Attitude - We know investing is a long-term game, especially if you’re using it to plan for retirement. Still, recessions have a way of keeping us focused on the short-term (the market dropped *how* much today?!). Instead, consider the Motley Fool’s advice on recession investing: make sure you’ve got your six months’ living expenses covered first, plan on not touching the portfolio for at least 7 years, and don’t attack the refresh button on your portfolio tracker every hour.
   
   
3. Go For Your Goals - The idea of investing doesn’t happen in a vacuum. We invest for a particular reason. To pay for our kid’s college education. To buy a home. To sip mai tais on a beach in 25 years. Focusing on why you’re investing over the long-term can also help guide the short-term decisions on how to invest during a recession. One not-so-sexy tip that comes out of this research: if you can financially manage to keep doing what you were doing before the recession, that may be the best way to move forward.

1. Study Before Picking Stocks - While an index fund is a great way to track the market, more experienced investors might be looking for more opportunities. Investopedia has a breakdown of which types of companies to avoid investing in during recessions, as well as which industries are more recession-resistant. More recession-resistant doesn’t mean completely recession-resistant, of course (and it’s always worth keeping the investment truth in mind that past performance is not indicative of future results!).