I’ve been talking about a recession for a while and while I don’t want to be the next doomsday predictor, the evidence and signs around us are too obvious not to ignore.
Let’s go to the fundamentals a bit. A recession is when lots of people buy less stuff, companies sell less, and some jobs go away. The economy goes down for a while and then it comes back up. Think of it like seasons: winter is cold, summer is warm — recessions are a tough season for money. They happen because of many reasons: credit problems, too much borrowing, shops losing sales, banks getting sick, or even big events like a virus. The good news is recessions always pass. The tricky part is preparing and acting the right way when they happen.
THE BIG PICTURE: MY SIMPLE RULES
I follow a few big rules that Warren Buffett always does that help me during recessions:
I keep cash ready so I can buy when prices fall.
I don't borrow to invest; leverage is dangerous.
I buy great businesses when they are on sale.
I focus on long-term value, not short-term noise.
I live below my means and save consistently.
THE 15-STEP RECESSION STRATEGY
This is based off Warren Buffett’s past investments. I’ve read a lot of his books and letters, and pretty much based my investment thesis on his experience, and this has led me to build a $400k portfolio in my early 20s. Here is the 15-step recession strategy that helps me see recession as the best opportunity of our lifetime.