5 questions to ask yourself before investing in a recession
Uncertainty about the future abounds.
A recession seems inevitable. The only question is: how severe will it be?
How should a long-term investor deal with this environment?
Start with these questions…
Why did I buy it in the first place?
Think of the reason you bought your stocks in the first place.
Do you still think autonomous electric vehicles are the future?
Do you still think additive manufacturing is a scalable business with a huge addressable market?
Are you still bullish on the prospects of solar energy?
Some of the best names in these industries fell 30%-50% in the past twelve months.
Have the prospects of these businesses depreciated by this amount?
Or just maybe, is this an opportunity to buy these stocks at a discount?
Which is the more attractive opportunity?
Scenario 1: Stock X is selling for 25x earnings.
Scenario 2: Stock X is selling for 15x earnings.
Today (scenario 2) is now available for many quality names.
However, most investors feel worse about investing today than they did a year ago.
Don’t let the whims of the market dictate how you perceive a stock.
Remember, in the short run the market is a voting machine. In the long run, it’s a weighing machine.
Stay focused on the long run. That’s where the real money is.
Should I try to predict the Fed’s next move?
Because the fed itself doesn’t know what its next move is going to be.
One year ago, the Fed was telling us that we shouldn’t expect any rate hikes in 2022.
What actually happened…
And we’re not done yet. There will likely be another rate hike before the end of the year.
If the Fed doesn’t know, why bother trying to predict this yourself?
Famous investor Peter Lynch once said: if you spend 13 minutes a year on economics, you’ve wasted 10 minutes.
Don’t waste your time.
Remember, YOLO (not counting akhira).
Which would I regret more?
Scenario 1: I invest more and the market goes to zero for the first time in history.
Scenario 2: I don’t invest more and the market recovers and reaches new heights like it has after every single bear market in history.
Considering the historical record suggests scenario 2 is far more likely, I would rightly be much more down on myself for not investing and missing the obvious opportunity I was presented with.
Even in the unlikely case where scenario 1 comes true, the world would be in such shambles that stocks wouldn’t be top of mind for me anyway.
What can I do to seize this opportunity?
It makes sense to educate yourself about investing in general during these times.
Now is when investing has the highest potential upside.
I’m biased, but our PIF membership allows you to follow well-researched, halal-conscious portfolios managed by decades of experience. Consider becoming a member today and take advantage of the once in a generation opportunity we are being presented with.