🌼5 Assets to accumulate during a recession(AMAZING INSIGHTS)
If you have looked anywhere online at the moment you will probably find yourself being swamped with the doom and gloom of the impending recession and the negativity that comes with it.
It is understandable, chances are that thousands of people will lose their jobs, GDP(Gross Domestic Product) will be down and asset prices will fall with it. However, Recessions present opportunities to buy up assets because, in essence, everything goes on sale.
If you do your research now and prepare yourself, you could elevate your net worth and income over the next five years and become one of the many millionaires that are made during recessions.
With that being said, in this article let’s take a look at some of the assets that you could accumulate during a recession, how you could go about it, and some useful, actionable information that can help you achieve success.
Disclaimer: Nothing in this article is financial advice, purely educational content! I am mearly a man sharing his experiences in a way to try and provide as much educational value as possible.
I am sure you are no stranger to stocks but they are an asset that almost everyone has access to purchasing thanks to the various mobile apps out there.
During recessions, it is very common for the prices of stocks to drop by huge percentages. For example, looking at the last major recession that lasted from December 2007 — June 2009(Known as The Great Recession) the S&P 500 Fell by 46.13% between the months of October 2007 and March 2009.
If you had purchased shares in an S&P 500 ETF during this time then you could be looking at returns of 471.98%(313.43% when adjusted for inflation) today in the best case(investing around 2009) and 262.89%(153.50% adjusted for inflation) in the worst case(Investing around 2007), based on an investment of $100 with dividends reinvested.
All through these numbers are amazing and you likely would have seen great returns, if you had tried to time the market, you would possibly have missed these opportunities. Advice from the big boys such as Warren Buffet is to focus on time in the market, not timing the market. Instead, you should focus on dollar cost averaging, investing multiple smaller amounts at various times during the year.
Recessions are also great times to purchase individual stocks for top-performing dividend-paying companies. In the 2007–2009 Recession Coca Cola’s stock price dropped from $31 to $20. If you had purchased Coca-Cola shares around this time, you would be looking at a return of 908.07% today, based on an initial investment of 10 shares that had an initial value of $572.40 back in 2008.
Google Stocks Tracker — Coca Cola Stock Price
Socks and Index Funds are great ways to accumulate wealth during a recession. Here are some tips:
Start researching great companies now and make lists of what you would want to invest in.
Save up some cash now so that you can take advantage of deals when stocks plummet.
Use stock screening and research tools such as Heydividends, Dividends.com etc to help you uncover opportunities.
Look at investment strategies that will help you meet your needs.
If you are new, read how to make $1000 per month with dividends.
Small businesses are generally hit quite hard in recessions and can often be the first to go into administration. On the flip side, the more resilient ones can survive and some even thrive.
There is a perfect storm brewing that paves the way for potential acquisitions of small businesses at excellent valuations, making them an opportunity for you to take advantage of over the next couple of years.
The wave of boomers who own SMEs(Small to Medium enterprises) and are retiring has begun and a lot of them do not have children or family members to pass their business down to. As a result, they are either being listed for sale or simply closed up. Keep in mind that 40% of SMEs are owned by boomers, this presents an asset transition that gives ample opportunity to those who take it.
If you combine this with the impending recession that we are facing and high intrest rates, the amount of competition around trying to buy up these businesses is low, meaning that you can potentially acquire an SME that is making a profit and has stood the test of time, for a lower valuation than normal.
There are also four other benefits to buying a business during a recession. They are:
More opportunities. Many business owners, hesitant about the future, will be looking to sell. This will give you a wider range of acquisition opportunities in practically any industry.
Lower purchase prices. Because demand is lower than supply during a recession, even the most reputable companies will be more affordable.
Easier to hire staff. A high unemployment rate means you’ll have better luck finding skilled and qualified employees.
Cheaper assets. With many businesses folding and selling their assets, everything from commercial premises to equipment is cheaper during a recession.
To get the best deals, look around your area and find established, boring businesses that are owned by boomers. Reach out to them and simply ask about their position and tell them that you are looking to buy a business. This will put you ahead of anyone else, giving you the opportunity to scope out deals.
Utilize online marketplaces such as Bizbuysell, Loopnet, and Bizquest.
You can possibly utilize Seller financing and other forms of acquisition loans to purchase a business. Then use the business to pay down the loan/financing.
Speak to a financial advisor to best see how you could go about this
Seller financing is a form of loan that you provide to the buyer of your business in order to facilitate the sales process. It works in a similar way to a bank loan, with the terms of the loan being officially documented in a legally-binding purchase agreement.
A controversial topic amongst many, Crypto assets offer huge upside potential over the long term with institutions itching at the bit to get into the many available options, creating the potential for billions of dollars to flow into the crypto markets and inflating values of assets such as Bitcoin, Ethererum and alike.
This is an asset class that is not for the faint-hearted and, comes with obvious volatility, however, crypto is here to stay and is currently in the same situation as internet-based stocks were in the days of the DotCom bubble.
Yes a lot of those stocks, and the companies behind them, no longer exist but the gems that survived went on to thrive and provided huge returns for those that gambled on Innovation.
Currently, the price of assets such as Bitcoin, Ethereum, Cardano, and all other crypto assets for that matter have tanked from their all-time highs, providing you with an opportunity to dollar cost average into them while everyone is in the mindset of doom and gloom.
CoinmarketCap — Bitcoin Price
Remember all of the positive news that was flying around when the crypto market peaked in 2021? It will do that again in the future, the same as it did back in 2017–2018. The key is to get into these assets before it becomes news.
CoinmaketCap — Ethereum Price
Crypto assets differ from traditional assets, such as stocks, because their underlying value is about utility.
When you buy a stock, you are purchasing part of a company, when you purchase a crypto token, such as Ethereum, you, for the most part, are purchasing a utility. This utility is then used to interact with the infrastructure, this infrastructure is what provides the value.
So, how do you get started with crypto? Well here are some tips:
Do some research into the space, and get yourself a basic level of understanding. I.e What bitcoin is, what Ethereum is, and a basic understanding of the various Alt Coins.
Read up on how to evaluate crypto assets properly, a good start would be this article by Coin Telegraph.
Look at the bitcoin halving cycle and how all other crypto assets follow it
Websites & Online Assets
SAAS, Apps, Websites, and all digital and online assets are great options to create cash flow for yourself. The crazy thing is that you can pick some great options up for a lot less money during recessions and times of uncertainty.
As mentioned with other asset types, websites and online assets can be purchased at lower prices when in times of uncertainty, such as that a recession.
Purchasing a small SAAS product or website is a lot easier than you think with sites like Flippa, Microaquire, and Empire builders facilitating the sale of online assets.
They can also be affordable. For example, Microaquire currently has tons of assets listed that are generating revenue for less than $10k and are doing annual revenue of $1k — $3k.
The caveat is that it is not very passive and will require you to put some work in. I would argue that it is worth it as you could purchase an asset at say $5000 that is already generating $1000 — $2000 in ARR. This also does not account for the potential growth of the asset once you have put some more work into it.
Furthermore, purchasing small assets like this is a great gateway into the world of start-ups and a great opportunity to pick up some affordable cash-flowing assets at low valuations. If you can buy it and grow its revenue, you are likely to find that it is easier to sell an asset that is generating more revenue as it will attract more buyers.
This leads to two main potential upsides when it comes to purchasing small online assets.
You can benefit from immediate cash flows that you can use to expand the asset.
You can benefit from the appreciation of the asset as with each new customer you are increasing the value of the business.
As I mentioned above, there are some caveats when it comes to purchasing these kinds of assets but the upsides are very tasty and this kind of asset comes with low — moderate risk.
Purchasing online assets can be a great way to gain instant cash flow. Here are some tips to get started:
Sign up to the marketplaces that I mentioned above, or any other for that matter, and create some kind of spreadsheet with the assets that you are interested in. Rank them based on the following: Can you add value? Revenue Quality, complexity to grow, distribution opportunities, and overall site quality. These are just a few criteria and you are going to want to conduct some proper due diligence before purchasing but it is worth doing.
Use tools such as ahrefs to establish assets traffic and ranking among search engines.
Research the legality behind purchasing online assets and research the process to understand what is involved.
Analyze how much work/time you are willing to commit as this may determine the kind of online assets you are going to want to buy. A blog for example will probably require less work than a SAAS, at least in the short term.
Currently, Real Estate prices are at huge highs thanks to the recent covid pandemic causing huge amounts of dollars to hit the market, inflating prices and accounting for part of the reason that we are heading towards a recession in the first place. The likely hood is that, with rising interest rates, we are going to see Real Estate prices begin to drop soon, presenting us with another buying opportunity.
The major issue here is that borrowing costs are higher, but, as time moves forwards and the economy starts to pick up, interest rates will drop and house prices will be lower providing you with an opportunity to pick up some good investment properties that you could potentially rent out while also benefiting from capital appreciation.
Interest Rates vs House Prices
As you can see in the graph above, there is a strong correlation between house prices and interest rates. When Intrest rates drop, borrowing becomes cheaper, leading to an increase in the availability of capital to purchase assets with lower monthly costs.
Unless you have been living under a rock, interest rates are on the rise again in an attempt to curb inflation. This will lead to demand dropping for Real Estate as borrowing costs are increasing, couple this with the supply that will come to market as people inevitably start defaulting on the mortgages due to the higher costs and you have another potential mix that could lead to a housing market crash, and at the very least a drop in prices, this is when you should try to enter the market.
Real estate is a common asset that more people are comfortable with because it is a physical object that most people understand.
Have a plan for how you are going to make money with the real estate you aim to buy. Do you want to rent it out on Airbnb? Rent it out? make sure you have decided upon this and then do research to asses how much you could potentially make.
Be paitent. There is no point in jumping in for the sake of it. Pay attention to interest rates, home prices, and the demand/supply of real estate.
Purchase in an area that you know. This makes it easier for you as you will most likely have an understanding of the area.
Recessions, downturns, uncertainty, and negativity provide ample opportunity for you to do the opposite from everyone else and acquire assets that can help you change your life.
Obviously, there are risks but remember to stay calm while everyone around you is panicking and snap up deals, acquire the right assets and your life could look very rosy 10 years from now, at least from a financial perspective.
Thank you for reading, have a good one!
Contributed by George Field
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