Most economists are forecasting a recession in 2023
7 lessons about investing in a recession from one of the world’s greatest investors:
7 lessons about investing in a recession from one of the world’s greatest investors:
Warren Buffet’s investment record speaks for itself
He’s made money during expansions and recessions
His investment performance since 1990 to date has handily outpaced the S&P500 by 5x
He’s made money during expansions and recessions
His investment performance since 1990 to date has handily outpaced the S&P500 by 5x
1/ Make the most of bad times
In the 2008 recession, Warren Buffett wrote:
“Bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price”
2022 was one of the worst years in the stock market
Credit: @awealthofcs
In the 2008 recession, Warren Buffett wrote:
“Bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price”
2022 was one of the worst years in the stock market
Credit: @awealthofcs
Every single down year in the stock market has been an amazing buying opportunity
2023 could be another one
2023 could be another one
2/ Nailing the bottom
In October 2008, buffet wrote an op-ed in the New York Times saying that he was starting to buy stocks
The stock market then fell 30%
In October 2008, buffet wrote an op-ed in the New York Times saying that he was starting to buy stocks
The stock market then fell 30%
Buffet’s timing wasn’t great.
He didn’t nail the bottom
But who cares?
Stocks eventually recovered and Buffet had positioned himself to benefit from the recovery
He didn’t nail the bottom
But who cares?
Stocks eventually recovered and Buffet had positioned himself to benefit from the recovery
3/ Recessions don’t last forever
In 2010, when Warren Buffet was asked if the economy was still in a recession post-financial crisis, he said:
“We’re still in a recession. We’re not gonna be out of it for a while but we will get out,”
Recessions don’t last forever
In 2010, when Warren Buffet was asked if the economy was still in a recession post-financial crisis, he said:
“We’re still in a recession. We’re not gonna be out of it for a while but we will get out,”
Recessions don’t last forever
It’s easy to get caught up in the news cycle and think that things can only get worse from here
But the market and the economy will recover eventually
This chart marks every recession against the S&P 500 since 1928
The lesson: Recession are terrible, but the market recovers
But the market and the economy will recover eventually
This chart marks every recession against the S&P 500 since 1928
The lesson: Recession are terrible, but the market recovers
4/ Crazy Things Happen
During recessions, a lot of crazy things happen
For example, stock prices overreact to bad news
Small earnings misses that would be overlooked in good times are unfairly punished during a recession
During recessions, a lot of crazy things happen
For example, stock prices overreact to bad news
Small earnings misses that would be overlooked in good times are unfairly punished during a recession
Warren Buffet reminds us to take advantage of these overreactions
“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
5/ Be Greedy
One of my favorite investment quotes from Warren Buffet is:
“It is wise for investors to be fearful when others are greedy, and greedy when others are fearful”
Understanding this quote will make you a better investor than 90% of folks out there
One of my favorite investment quotes from Warren Buffet is:
“It is wise for investors to be fearful when others are greedy, and greedy when others are fearful”
Understanding this quote will make you a better investor than 90% of folks out there
It’s easy to become an investor in good times
It’s much harder to invest when everyone around you is fearful
But investing when others are fearful can set you up for great things when the good times return
It’s much harder to invest when everyone around you is fearful
But investing when others are fearful can set you up for great things when the good times return
6/ Zoom Out
During a recession, you should expect financial results will be affected by a softer economy
Warren Buffett recommends taking a step back and examining results over a longer time frame
“Do not take yearly results too seriously. Instead, focus on five-year averages”
During a recession, you should expect financial results will be affected by a softer economy
Warren Buffett recommends taking a step back and examining results over a longer time frame
“Do not take yearly results too seriously. Instead, focus on five-year averages”
Instead of focusing on results in a bad year
Zoom out and take a look at longer-term trends
This will allow you to see how a business has performed both in a good economy and a bad economy
Zoom out and take a look at longer-term trends
This will allow you to see how a business has performed both in a good economy and a bad economy
7/ Invest in Yourself
When Warren Buffet was asked what investment advice he had for investing in a recession,
He responded:
“The most important investment you can make is to invest in yourself”
When Warren Buffet was asked what investment advice he had for investing in a recession,
He responded:
“The most important investment you can make is to invest in yourself”
Investing yourself will always pay dividends in the future
The education and skills you acquire are recession proof
For example: If you learn how to cook, you can cook in a good economy and a bad economy
Don’t neglect investing in yourself!
The education and skills you acquire are recession proof
For example: If you learn how to cook, you can cook in a good economy and a bad economy
Don’t neglect investing in yourself!
TL;DR:
1. Make the most of bad times
2. You can't nail the bottom
3. Recessions don’t last forever
4. Crazy Things Happen in bad times
5. Be Greedy when others are fearful
6. Zoom out
7. Invest in yourself
1. Make the most of bad times
2. You can't nail the bottom
3. Recessions don’t last forever
4. Crazy Things Happen in bad times
5. Be Greedy when others are fearful
6. Zoom out
7. Invest in yourself
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Follow @AliTheCFO
I tweet about:
• Finance
• Business Frameworks
• Personal Growth
Follow @AliTheCFO
I tweet about:
• Finance
• Business Frameworks
• Personal Growth
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