How the Rich Leverage Recessions
Factually, times are hard. Amidst global commodity shocks, a depreciating currency, trade restrictions, and monetization of the deficit, inflation is surging and pushing millions of Nigerians into poverty (World Bank).
On a global scale, the U.S. has already experienced two consecutive quarters of negative GDP growth in 2022, which?some people consider to be a recession. The OECD Economic Outlook reports that "the world economy is slowing more than anticipated".
Everyone has a provable reason to panic, be anxious, lament, and blame the government, spouses, parents, or whoever is in a blameable position. I mean, inflation is predicted to be worse in developing economies, where price increases are projected to reach 9.9 percent on average over the course of this year.
In particular, Nigeria's inflation currently sits at an alarming 21.09%. Hence, you can't blame the sad tweets, attempted suicides, job layoffs, etc.
The question is, is there anything good in all these sad reports? Well, let's read the following highlights from?Investopedia?together:
1) The 1981-1982 recession helped to lower the inflation rate from 11% in June 1979 to 5% by October 1982, and the U.S. economy grew for the next eight years.
2) A recession can end the misallocation of investment capital; setting the stage for an eventual recovery and renewing the foundations for economic growth.
3) Higher interest rates during inflation can translate to higher yields on deposits in savings accounts.
4) A recession can be a good time to hunt for bargains and purchase?undervalued?assets.
However unsettling it may be to see all that red ink on your account statement, it's important to avoid overreacting and selling your assets at their recession-induced lows.
The first thing to know is that recessions are an inevitable and necessary part of the?economic cycle. Hence, this knowledge will keep your eyes open and your mind alert. Like I always say, the major thing to guard jealously in a tough economy is YOUR CONTROL!
You must learn to be in charge of your financial decisions. They must not be fueled by panic or fear. Rather, strategic calculations. This may not always be favorable, but making the decisions boldly, enables you to pick yourself up and try again quickly.
The biggest enemy in a tough economy is not the sad statistics. It's the fear and panic that erodes people's mind and lead them to make poor financial decisions.
One thing wealthy people have learned to do in this recession that has consistently favored them is BUYING CHEAP INVESTMENTS.
During a recession, there is more supply for investments than demand for them. There are more people willing to sell their investments than there are those willing to buy them. The media plays a vital role in spreading fear and terror. Prices of stock, real estate, and other investments drop.
Hence, this is the time to start acquiring those undervalued properties and hold them till the economy recovers. It is the fear of buying when it could still go down that holds people from investing during a recession.
Smart investors, however, invest for the long term. They understand that what matters is that you buy at cheap prices and then hold. They may lose further down the line, but once things start recovering, they will be in a better position for profit.
If you'd love to engage yourself in such and need a financial advisor to guide you with insights and strategic recommendations,?chat us up.
In conclusion, the only people who ever thrive in a tough economy are those who see value where others see the only price; those who analyze data where others read only headlines; those who see opportunity where others see only disaster; those who follow their instincts where others follow the crowd; those who think long term where others think short term; those who have the courage where others have only fear; and those who are patient when others are anxious.
Those are the people who become rich during a recession. The question is are you one of them?