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Cashing on the Recession

Wealth generation is a process, not a single event. Therefore, you cannot wait to make money only when the economy is doing well. You have to use all opportunities that are available when the economy is going north or south.

The incredible thing is that there are opportunities in all kinds of markets. To start with something easier to grasp, consider the stock market. It is true that most people lost a lot of money in the last recession, and they are still trying to recover from the big losses occurred during that time.

Making Money on a Downturn

However, investors that understood a little more about the market were able to make money with all these problems. There are several strategies to do this but consider this simple one: sell your stocks when you see that a recession is inevitable. Then, wait a few (or many) months until the price of stocks are hammered down, the same way we saw last time. Then, use your cash to buy stocks are much less then their original price.

Investors that followed this simple strategy made at least 50% on their investment, without lifting a finger, just at the moment they bought stocks back. But then, after little more than a year, stocks rebounded to almost the double of the price. This means these investors more than doubled their capital, all due to a recession.

Other people did even better by going short on stocks, or buying options. All of these seem risky and  complicated, but are just ways of getting more money when you need.

Making Profits in All Areas

I want to emphasize that this applies not only to the stock market, but to everything else. A recession may be a great opportunity for investing, as long as you avoid being trapped. The recession is really bad for people that are on the short side of the economic life — for example, people with much debt, and in companies that are losing jobs.

But if you can manage well during a recession, it can be a wonderful time to invest. This is the philosophy of great investors, for example Warren Buffet. He always has so much cash in hand, that a recession is just a great opportunity for him to make a lot of money, at the expenses of big corporations such as Goldman Sachs.

There are some practical ways you can explore downturns to your advantage. For example, you can use the opportunity to start a business. While it is true that fewer people will be buying, it may be a good time to start, because when the economy comes back to life you will have a huge improvement in profits.

Another way to profit is to use your savings to buy productive assets that are now costing less. Real estate is the big example now: you can buy a home sometimes for 50% of the price you’d pay for the same place three years ago.

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