Do you know when cash-rich billionaires make their big investments?? It is during poor market conditions. Why? Because things get cheaper than usual, be it stock market, real estate, or any luxury market. It is sad, that the condition is worse now with COVID-19 with millions of job losses, and many people losing their livelihood.
People who see recessions as an opportunity are the ones who infuse cash to the weaker economy. When things get cheaper people tend to buy, build, or repair when all these actions happen, it automatically helps the economy to revive. It is an act of contribution to help the economy to bounce back.
It is very natural for people to go frugal when they see an uncertain economic situation ahead. In the month of August 2019 all Indian retail sectors saw a low sales volume which grew to a bigger fall in the later months. There was news of uncertainty spread because of the political condition of India. The worst-hit industries were automobiles and real estate that employees the major population. Later in January 2020 the COVID-19 pandemic made things worse and markets were crashed. Lockdown made the retail market to crumble. All these have made us remember the 2008 recession.
When uncertainty on economic condition hit the middle-class people. They go on to saving mode which indirectly affects the retail market. Middle-class consumers are the ones who contribute majorly to the retails sector. This behavior of consumers gives a jolt to all industries. This puts the market under turmoil and force companies to sell a product on heavy discounts.
The recession hit hard on people who don’t have long term financial planning. Planning an emergency fund is very important to survive any uncertain situation. Be it an economic recession or any medical needs, an emergency fund will give you a breathing time. You should have funds at least to back you for 6 months. Every recession teaches people to have an emergency fund and to have cash reserves to make a calculative investment.
When a recession hits the market there are few things you have to grab on. Invest in all your favorite dividend stocks that hit the lower price band. Real estate markets have more sellers than buyers, a great time to invest in that piece of land you were looking for. As said by HDFC chairman Deepak Parekh “the price of the real estate market will come down by 20% post-COVID-19 “. Not only real estate all high-value products on retails markets will be found with heavy discounts and freebies.
During recession banks play a major role in reviving the economy by reducing the interest rates and increasing the credit margin. Lower interest rates stimulate the consumers to borrow and inject the funds into their development. Since the interest rate on fixed deposit reduces people tend to divert the money for other investments than parking it idle in the bank.
Banks introduces various packages on home loans, vehicle loans and personal loans to stimulate the economy. (Check your loan eligibility)
During recessions, fixed deposits, are no more a choice for a good investment. As the interest rates get lowered, people tend to invest in dividend stocks or on real estate that gives good returns.
It is the time where you can afford a loan on lower interest and close the loan with a higher interest rate, where you save more money on paying interest. You can close all your credit card loans which have a minimum of 18% interest.
If you are a small business owner you can use this opportunity to stock up your raw material/ stocks and make a good profit when market revives.
If you had a good long term financial planning recession will not put you in a panic condition. Recession is the time which will make you realize how long term planning on your finance is important. Take this as an opportunity to learn and grow. If you have an opportunity and capability for investment during a recession , don’t hesitate to look into it.
