What Exactly is a Recession?
Generally speaking, a recession occurs when an economy experiences slowing economic activity. Normally, the GDP (output) of a country is constantly growing, so the rule of thumb for a recession is two consecutive quarters of declining GDP.
Remember The Golden Rule of Investing
When a recession hits, oftentimes people start selling their positions. They do this because they fear that the stock market will drop even lower. This is a kind of self-fulfilling prophecy because when people sell stocks it lowers the demand for them and thus reduces the price.
Look at Historical Data
The human brain is weird in the sense that when times are going good, it’s easy to forget that bad times every existed and vice versa. This means that during a recession, it can often be tough to see the light at the end of the tunnel and hope is easily forgotten.
Lower Entry Points = Higher Returns
If you’re young and have time on your side, you should rejoice during a recession as a market downturn allows you to pick up many assets for cheaper than you could in a bull market.
Prioritize Paying Off Debt
If you’re really scared of the economy getting worse and are scared of tossing your money into a stock market that seems like it will decline further, there is an easy way to make immediate returns on your cash: pay off your debt.