The stock market has been on a wild ride lately, and Americans aren’t enjoying it. In fact, a Gallup poll conducted in late April 2020 revealed that only 21% of people think stocks or mutual funds are the best long-term investment. This was the lowest level since 2012. And that was long before it was announced that the country had officially entered a recession.
If you are concerned about buying stocks now, you are not alone. But you may also be making a big mistake, as a recession is as good a time to invest as any other, or perhaps an even better one.
Don’t trust my word either. Heed the advice of the Omaha Oracle, as Warren Buffett, one of the world’s best investors, has a lot to say about investing in tough times. Here are some pearls of wisdom to take seriously.
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1. “The general fear is your friend as an investor because it serves to buy bargains”
More than half of all Americans fear that the market has not yet bottomed. If you are one of them, you should not let fear stop you from investing your money.
As Buffett explained, when most people are afraid, it is a good opportunity to buy stocks at low prices. And who doesn’t want to buy low and sell high?
2. “The best opportunity to deploy capital is when things are going down”
While the market has largely recovered from the coronavirus collapse in March, another correction is inevitable as many investors are still overvaluing stocks because they do not take into account the full economic impact that COVID-19 could have throughout the year. summer and fall.
If the market ends up falling again, you may be tempted to stay on the sidelines and wait until the bad times are over. Instead, listen to Buffett’s advice on the downside opportunity, and take the opportunity to get your money for even deeper discounts.
3. “Those who invest only when the commentators are optimistic end up paying a high price for a meaningless guarantee”
A quick glance at the news shows that commentators don’t have much hope for the future. And with the country in recession, coronavirus cases on the rise, and justifiable fear of a second wave, you won’t get much peace of mind right now.
But according to Buffett, that’s good because he won’t pay a high price for words that mean nothing in the end, since, after all, no one can predict what’s to come.
4. “The risk comes from not knowing what you are doing”
Americans may be suspicious of stocks because they are concerned about the risk of loss, and the March market crash did not help allay their fears. But, as Buffett points out, putting your money on the market really only comes with great risks if you don’t know how to do it correctly.
Of course, any investment could lose money. But if you know how to choose solid companies to invest in (or if you invest in index funds that track market performance) and create a diversified portfolio, the most likely result based on decades of historical data is that you will get a reasonable price to return overall, with time.
This does not mean that no investment will underperform and it does not even mean that it will not have bad years. But it does mean that when you take the time to learn to invest, you invest for the long term, and as you make informed decisions to build a diversified portfolio, you reduce your risk, even if you are investing in a recession. .
Of course, on the other hand, if you think you can invest your money during the recession and make money quickly without taking the time to learn the basics of a good investment, you could be preparing for disaster.
5. “Predicting the rain does not count; building coffers does”
There are many reasons for doom and gloom during the 2020 recession, but anticipating bad times does little to help you survive.
Instead, follow Buffett’s wise words and take the time to build your ark. You can do this by developing a sound investment strategy, researching and selecting stocks that will keep you happy for a while, and making sure you’ve taken the necessary steps to protect your finances from the recession.
Don’t pass up the opportunity to invest during a recession.
Recessions almost always present buying opportunities, but this is unique because it was not driven by natural business cycles, but by a black swan event. If effective coronavirus treatments are developed or a vaccine arrives earlier than expected, economic recovery can be rapid.
Don’t miss out on an opportunity to invest when things look bleak, provided you do so wisely. Otherwise, you may very well regret it.
