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Not all recessions are the same and not all millionaires are the same. But what if we asked the question: How to become a millionaire during a recession? Does this seem counter intuitive? What if you learned that recessions typically formed the foundation for future millionaire gains.
Recessions are to be welcomed. We should be jubilant as we await the long anticipated and much discussed recession! Repeat after me: recessions are our friends. I have personally made some of the best long term investments during recessions, whether it be in equities, real estate, etc.
How to Become a Millionaire During a Recession is Not Get Rich Quick
But, this is not a get rich quick thing. I think that is mainly a myth. Most wealth in the world and in the US is built over several decades of consistently investing prudently and avoiding major catastrophe as much as possible.
Recessions Do Suck
Ok, I am being a bit tongue in cheek here, whatever that means. I realize that sometimes recessions mean job loss and lower incomes for millions, which is no joke. I am not cold hearted to those that feel the economic pain. Many hard working folks that play by rules can at times be steem rolled by the economy. So, I am not saying everyone should love recessions. But, if you can keep steady income, be prepared, a recession may be the best thing that ever happens to your net worth and long term wealth building.
What if we never had recessions
How to become a millionaire during a recession? It would be an interesting thing if we never had recessions. I am not an economist, but what would a world like that look like? From my personal experience I would probably have never been able to buy a house. A lack of recessions could result in a world where more and more wealth concentrates in the hands of one percent of the population while the rest of us cling on. So perhaps in some way, they are a natural cleansing cycle of the economy to weed out weaker businesses and encourage re investment into under valued assets.
3 Areas to Invest for how to become a millionaire during a Recession
First we must address that each economic recession is unique and presents its own opportunities and risks. Clearly the Great Recession of 2008 provided a huge opportunity in real estate. Anyone able to survive the carnage and pick up some real estate did very well over the subsequent decade. But it did take time and this not an overnight thing. How to become a millionaire during a recession? Read on!
During a recession, it can be challenging to know which investments will perform well. However, here are three investments that have historically performed relatively well during economic downturns:
Bonds are one way for how to become a millionaire during a recession
When the stock market experiences volatility, many investors turn to bonds as a safe haven. Government bonds, in particular, are considered a low-risk investment because they are backed by the full faith and credit of the government. Corporate bonds may be riskier but can offer higher returns. I will always be interested in strategic diversification and I believe bonds are a key area for my portfolio in the long run to manage risk.
How to become a millionaire during a recession? 2 words for you: Defensive Stocks! Defensive stocks are companies that tend to perform well even during a recession, as they offer products or services that are considered essential. Examples include companies in the healthcare, utilities, and consumer staples sectors. These companies may not experience the same level of growth as tech companies during an economic boom, but they may be a reliable source of returns during a downturn.
I personally tend to gravitate to the Dividend Aristocrats.
So in my view, I am focusing on dividend aristocrats in those areas of healthcare, utilities and consumer staples. Also gaining exposure through focused ETF’s.
Dollar Cost Averaging
During recessions typically 401k balances dip. Some people freak out and sell. This is not what I am doing. I am realizing that each monthly input into the 401k is now buying more shares at a discount of a diversified basket of stocks and bonds. Shouldn’t we all love when we buy stuff that we like on sale? This is one aspect of how we used the Money Vikings Investing Trifecta to build wealth over the last couple decades.
How to become a millionaire during a recession? Real Estate are another couple words! While real estate can be affected by a recession, it is often less volatile than the stock market. Property values may dip during an economic downturn, but real estate can be a good long-term investment. Rental properties may offer a reliable source of income, and REITs (real estate investment trusts) can provide exposure to the real estate market without the need to own physical property. One of the best real estate investments over the years is through crowdfunding platform Fundrise.
It’s important to remember that no investment is completely immune to economic downturns, and past performance is not a guarantee of future returns. It’s always a good idea to speak with a financial advisor before making any investment decisions.
One other way to think about all this is to consider what has been beaten down with a long term potential. Clearly Bitcoin seems to be holding well and gaining. Tech stocks seem to offer bargains and discounts.
Don’t Give Up
The important lesson during a recession is to remember to master the mental game of building wealth. Investing is a long term game. It takes working through challenging market conditions to reach your goals. That’s how to become a millionaire during a recession!