“Happiness is from ourselves” is a well-known quote from Aristotle. It serves to tell us that sadness or joy are not determined by events; they depend on the kind of person facing the events. Unfortunately, this fact is not only correct for happiness; it’s also a glaring truth about money and wealth.
What do we mean? 2008 recorded the greatest economic crisis after the great depression. This event affected a lot of businesses and caused many to lose their job, become homeless and struggle to meet their basic needs. In 2020, the pandemic also brought another economic downtown. The impact was so bad that almost everyone felt it. However, as bad as we all know these events to be and how many people become broke, it was a time when others made their way to riches and abundance.
These two scenarios certify the former statement. Whether a period of time is good or bad is determined by the person seeing it and not by the event. At the same moment, some people are seeing a recession. Some others are spotting opportunities that could change their financial life, hop on it and make a huge wealth for themselves. In today’s video, we want to share the steps you need to prepare yourself so that you will be among the minority that benefits from the economic downturn instead of losing out. Every step is essential to your financial success. Ensure you read till the end, so you don’t miss any points.
Tips on How To Make Millions In An Economic Fall
The world is like the stock market. It moves up and down. That is why the financial crisis history will always repeat itself. The truth is that no matter how much we try, we cannot stop a global crisis because it’s not within our control. Since we can’t dictate how well the financial world will move, what then can we do? Improve your knowledge and become financially intelligent. Wisdom dictates that we focus on what we can control and care less about the ones out of our reach. You have the control to do something about the situation, protect your money, and even skyrocket your wealth. This is what makes the difference. Knowledge is the microscope that will expand your vision and make you see opportunities when others are seeing a recession.
You need three arsenals to be financially buoyant and take advantage of red economic moments. The first one is financial education. It’s your map and light that shows you the way when everything is dark. The second arsenal is access to cash. This is your way of preparing ahead of a crisis to reap the opportunities as you spot them. The last arsenal is patience. This deals with your emotions and behavior as both are important aspects of your building wealth. Right now, patience is more required than ever before.
Here is what we mean. A recession is technically a prolonged economic downturn that extends up to and beyond two quarters.
The economy is failing due to high inflation as people have less money to spend. When this happens, the government takes measures to deal with the surging inflation. They do this through many strategies, one of which is raising interest rates. The problem is that high-interest rates also affect the economy negatively. So, the economy is failing as the government is trying to fight inflation. At this moment, we are not only in an economic slowdown but also facing high inflation. This is why you need patience because it might take longer for the economy to recover.
Now that we understand what’s happening in the financial world, let’s see where there are opportunities and how you can leverage them to make more money.
During an economic crisis, there is more supply and little demand for assets. Since supply and demand dictate market price, the price of assets goes down and creates a rare advantage for investors to buy cheap and sell high later.
Here is why there is a price advantage in a recession. When the economy is falling, many people lose their jobs, businesses experience losses, and some even go bankrupt. Therefore, most people don’t have the financial capacity to buy. Even if they want to borrow, they can’t easily find one because loans are harder to get, and interest rates are above normal. Those that have the money to buy are scared and afraid of the bad economy perpetrated in the news. They prefer to keep their money because they don’t want to lose it. This creates a low demand for valuable assets.
Similarly, owners are pushed to sell off their assets when there is an economic crisis. Many factors drive this. Some have debts they need to settle and bills they need to pay. So, they sell off their assets. Others even sell so they can have food on their table. Another factor is fear. As people see their assets fall in value, they don’t want to lose out completely and start selling. This gives room for a term called desperate or distressed sales. Because owners are desperate to sell and there is more supply, they will reduce the price to get faster sales.
The lesson to be learned here is that you shouldn’t sell good assets out of fear, especially when you still have a decade or more to retire. Instead, you should stick to your investment strategy, providing your asset can stand the test of time.
Based on these analyses, this is how you will make more money from an economic crisis; buy good assets while they’re cheap and wait to sell them when the economy bounces back again.
Steps to Make More Money From an Economic Crisis
Start Learning About Investing
The best way you can do that is to read raw reports and data. That will give you undiluted access to educate yourself without getting confused by people’s opinions. You should also upgrade your knowledge of what makes a reasonable and profitable investment to know opportunities from bubbles. You have to think differently from the majority and design your interest for as long as a decade or more.
Put Cash Aside
This will demand that you start spending less and increase your income. It might be difficult to save in a time of inflation, but it’s worth the effort considering that you will be saved from the flood of economic slowdown and can even get financial freedom.
You don’t need to predict or forecast too much about what will happen next year or anytime in the future before you invest wisely. What you need is to look for solid investments that can stand the test of time at a good price, in other words, a discounted price. You should also apply your financial intelligence to select profitable long-term investments and not short-term bubbles that can cause you to lose more. You can invest in stocks, real estate, and cryptocurrencies or buy physical businesses depending on your interest and knowledge.
Three Approaches You Can Follow to Invest and Benefit From a Price Drop in a Recession
There are three approaches you can follow to invest and benefit from a price drop in a recession. The approach you choose will depend on your risk appetite and how involved you want to be.
Passive Approach Known as Dollar Cost Averaging
It’s a practice of putting a certain amount towards your investment on a regular basis, notwithstanding the price. This approach is suitable for those that are not highly interested in an extensive study of the market. It’s beneficial for a recession because of the fall in price. You will be able to buy more with the same amount. It’s, however, essential to know that this approach must be for the long term. It takes years of consistency to get the best out of your investment. So, you don’t want to disrupt the plan due to market inconsistency.
Second Approach Is the Action Plan
Where you actively look out for good stocks, real estate, cryptos or other assets with good buying points so you can buy cheaper than the actual value. You can also buy a business at a discounted price, especially startups that are struggling with finance. If the startup succeeds, that’ll be a good point to skyrocket your net worth and multiply your money many folds.
A nice way to run the active approach is to buy in phases as the price continues to fall instead of buying all at once. You will have the chance to buy cheaper and get the best gain possible.
If you learn something from this blog, kindly hit the like button to appreciate the brain behind it and share, so the good message gets to other people who are serious about their financial life. Remember to signup to our newsletter to get the first taste of the financial and investment juices we share on this platform. Kindly check out also this related post such as “10 Key Principles of Investment“.
Recommended books for further reading:
- A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today
- Investing QuickStart Guide: The Simplified Beginner’s Guide to Successfully Navigating the Stock Market, Growing Your Wealth & Creating a Secure Financial Future
- The Barefoot Investor: The Only Money Guide You’ll Ever Need
- Influence; the psychology of persuasion by Robert B. Cialdini
- The Financial Times Guide to Investing:The Definitive Companion to Investment and the Financial Markets: The Definitive Companion to Investment and the Financial Markets
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