SFS #003: It's a Progression, not a Recession!
Read time: 5 minutes
Peace and Happy Saturday!
Many wealthy people get rich or richer during economic collapses. Billionaires Michael Burry and Warren Buffet are two examples of investors who have done so. But what about everyone else? Can we also leverage extended economic down turns to our advantage. The answer is definitely YES and here’s 7 ways the big boys do it that we can copy:
1-Shorting the stock market.
Billionaires do this all of the time. Shorting is just a fancy way of investing in a stock going down versus going up. This may take a little bit of study so that you can have data to back up when you think a stock will drop but it is certainly a likely reality for any stock in the face of a recession or economic down turn.
2-Investing at the bottom of a crash and waiting for the economy to bounce back.
Warren Buffet is famous for this, he often buys the stocks of great companies when they are down (at a discount). He holds them until the market goes up back up and profits. You can view this the same as your favorite stores having a sale on their items. Whatever you bought during the sale automatically rises in value after the sale. Many billionaires buy during the bottom and sell for higher prices after the market rises. You will need to be sure you’re in a position to wait on the market to rise again but this is a good strategy to learn.
3-Buy when others start panicking.
When the market goes down or is expected to decline for a long period of time, people will start selling assets. This includes businesses, real estate, stocks and other assets—anything that has value that someone decides they needs to sell ASAP. You can be right there to snatch it up a discount. And you can go back through history and see that this happens every single time, the only question is will you be in a position to take advantage of the fear and panic?
4-Purchasing Precious Metals
Precious metals tend to perform well during market slowdowns. Usually the demand for these commodities increase during recessions which increases the prices.
These metals are considered safe.
Bonds tend to do the opposite of stocks. So this means when stocks are declining the rates of bonds tend to rise. A bond is nothing more than a loan to an institution. One particular bond to check into as of the date of this writing is Series I Savings Bonds. The current rates of those bonds are 9.62%. Here you are loaning the government money and waiting for your returns.
6-Investing companies with strong histories of paying dividends.
Strong companies who pay dividends are ones to watch during a recession or economic downturns. This is mainly because even during these down times they will continue to pay dividends to investors. And in the case of REITs they actually have to pay investors dividends. Additional income during a recession is a good thing and if you are catching the price of the stock at a low point when the market rises you will also get the benefit of the higher share prices.
7-Taking advantage of Dollar Cost Averaging.
This last one is powerful. Dollar Cost Averaging or DCA is a fancy way of saying you will invest the same amount of money over regular intervals (like monthly) regardless of prices. Doing this during a recessions can make you richer because you will have spent the same amount of money as before the down turn but now you are getting the same stocks at cheaper amounts. Just like number 2 you could hold these stocks until the market goes back reducing the average cost of each purchased share. This is a big deal!
I hope you have enjoyed this installment of 7 Figure Saturdays. Remember billionaires don’t have to be the only ones benefitting from a Recession. And it's a regression for us all at this point not being in a position to do so!!
If you want to learn more about my financial coaching methodology, I have attached my "Seven Steps To Seven Figures" guide. And if you want to discuss the "Evaluate Your Mindset" strategy further, schedule a goal session: https://calendly.com/emcloydyourcfo/30-min.