I was reading Ben Stein’s article on buying stocks when there is a recession because of the strong long term outlook. Don’t look at 2008 but at 2018 he says. Sure, if I have a positive cash flow every month and absolutely no debt, I can buy stocks when there is a recession because I believe I will come out ahead in 15 – 20 years. However, most of us are still battling debt, or choosing between creating an emergency fund and paying off our mortgage early!
For us, those articles are not relevant because we do not have a lot cash to pour into the market that we don’t need to take out. It is important to remember that having a long term outlook means that the money that is put into your account needs to stay there while the stocks / mutual fund / ETF go down during a recession. It could be months or even years before the money you put in recovers. It is important to remember that not only do you need to be patient, you also need to be solvent enough to weather the storm.
People like us might be out of jobs in a recession but our bills will still need to be paid. Before you buy stocks after reading these types of articles, remember to apply to your own situation. Yes, keep investing and don’t panic but don’t put all the money you had allocated as savings and emergency funds into the stock market either.
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{ 3 comments… read them below or add one }
All I hear in the news is buy buy buy and all people do is sell sell sell when the stock market goes down
I beleive it is all things in moderation – there does not need to be an all or none scenario. Pay off that debt, sock some away into an emergency fund, but continue to invest as well. There is nothing wrong with doing all three.
Calvin: It’s very unfortunately that this happens but it’s natural human behavior. The best we do is educate them so hopefully they can stop panicking.
The Dividend Guy: It’s very easy to do this when you have money to do all three and making progress but what if you really don’t have that much free cash to do all three things? There will always be people that need to do one before the other in which those articles fail to address.