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Recession and investing
Investing Strategy
As we are possibly heading towards a recession, is it worth saving money as we could be possibly out of jobs and would need money to live life or we should still keep investing as we were before? My thoughts are to stop at the moment as market would crash even more if recession does occur which looks very likely at the moment and if we are highly invested we wont have liquid cash to live life. Please note, having 6 months worth of expenses saved as savings as a minimum is a good thing, but recessions are usually and will likely be much longer than the 6 months. So what are the steps we should be taking movies forward?
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Nelsi Devendrakumar Patel
Asked on 30 July 2022
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Hi Nelsi :)
Is it worth saving money? Always!
We should always keep enough money around in case of job loss or unexpected problems like that. At the very least, this helps us relax and not worry about having money to live on.
As for the market, the truth is nobody knows what’s going to happen in the next 3 weeks, 3 months, or 3 years. This is a really important thing to understand.
The exact same type of thinking occurred right in the middle of the covid crash in 2020. The market was going down, so people stopped investing because they thought it would get worse and worse. But that was exactly the time that market started recovering.
Markets tend to look forward into the future. So what tends to happen (historically at least) is that markets often fall before a recession and then during the recession they actually start recovering as they are looking forward to when things will eventually get better. The point is, it’s not as easy as saying «recession is coming, market will get worse». Maybe it will, maybe it won’t.
I actually wrote about this during the middle of the pandemic, and it’s really interesting to see how the same comments and thinking applies today. I’ve linked some content below related to this topic which might be helpful for you.
Short-Termism and Market Madness: https://strongmoneyaustralia.com/short-termis...
My Thoughts On The Corona Crash: https://strongmoneyaustralia.com/my-thoughts-...
Recessions, Fear & Market Timing (podcast): https://strongmoneyaustralia.com/podcast-rece...
How to Become Recession Proof: http
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