Are We Heading For Another Global Recession?

A year ago, to this date Toronto Stock Exchange (TSX) composite index dropped to 13,935.44 and was bearish threatening towards a recession. Call it Christmas jitters as you will. Many investors got nervous and was in a sell-off mode.

Fear and Panic

Admittedly I got nervous too but as a long-term investor I keep my fear in check and remember that I am for a long haul. I didn’t panic and use common sense of the situation.

Subsequently, I went back to basics, scrutinize my equity holdings, reviewed my goals and my own fundamentals.

That lead me to change my direction – I was in a buying mode instead of selling. This was also the time that my teenage son and daughter started investing and encouraged them to start positions on those companies on our watchlists.

I purchased and added some shares on most of my equity holdings. I considered it my Christmas bargain holiday shopping instead of going to the mall. (I know it’s kind of boring) With the holidays I also have to spare cash for our January credit card bill. ( Those once a year rise in credit card bill) I was only able to buy shares that was enough for our budget.

Focusing on long term goals

For many investors who did snap a bargain in December 2018, it was not that I got lucky, because just like others NO one has a crystal ball.  As a dividend income investor- myself, I just stick to my long-term goal and fundamentals: Buy and Hold. Add positions when able. My ultimate goal: living off its dividends without harvesting its capital.

Thankfully those Christmas jitters in the market was unfounded as the stock market rebounded slowly a week later and was in a bullish mode for most of 2019.

Recession fears lingers

Again, in the last few months and weeks, fears of another recession dominates news on TV, social media, financial forums and blogs. 

Every economy experienced periods of expansion (growth) and periods of contraction (recession). The economic cycle is affected by such factors as gross domestic product (GDP), interest rates, total employment and consumer spending. I am no economist and will leave that discussion to experts on this matter.

A lot of us ask, are we going for another recession soon? In my humble opinion, I guess it’s not the question of – is it going to happen and when?

Eventually we will experience one again in the future. Nobody has a crystal ball. Therefore, No one knows exactly when it’s going to happen. The question we all ask ourselves is, how do we prepare ourselves during market downturn?

 My 5 simple tips to survive a recession

 1) Build yourself an emergency fund. There is no hard and fast rule as to how much you need to keep as an emergency fund. I would say 3-6 months of living expenses saved up is a good start. The more the better. But don’t just keep your emergency fund on minimal interest-bearing accounts. Shop around for high interest savings account (HISA).

2) Reduce your debt. Tackle your bad debts aggressively. Pay off your debts that incur high interest rates such as store cards, credit cards, lines of credit, car loans etc.

3) Live within your means. Embrace minimalism and frugality. Stop wasting money on things that you need. Invest in memories with your family and loved ones not on material things.

4) Learn yourself another skill or find a side hustle. Don’t rely on your existing job. As economy sours sometimes it’s unavoidable that companies will close and jobs may become redundant. It’s best to prepare yourself by learning another skill or a hobby that’s making money for you. With technology and internet these days there are so many side hustles to choose from. Develop your passion or hobby into an income generating streams.

5) Invest for the long-term and keep yourself invested during a recession. For any long-term investors, market downturn is some welcome news for them. During a bull run stocks are expensive to buy and but investors still continue to buy which equates to a few shares. In a recession most of these stocks (if not all) are at a bargain which means more shares for their money. As a dividend income investor this means increase dividend income during recession provided you exercise due diligence prior to partnering these companies.

 

My Final Thoughts

Recession is an ugly phenomenon in any society and its part of the economic cycle. If we prepare ourselves and adhere to these simple tips, we can mitigate the impact it will cause once the real market downturn occur.

 

Is there other tips not mentioned above to recession proof your finances? I will be interested to know. Please leave a comment below.

Happy Holidays Everyone, enjoy this time with your family and try not to spend too much!

 

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