Says ut is an old economic adage that the Inflation is "when an egg costs a dollar". And the Recession is when "a dollar costs an egg". Hard to explain it better. A recession is a contraction of the economy and its main effect is to slow down economic activity. Lhe speed at which money moves slows downand the by less hands, business stagnates, prices fall, and so gradually the economy stagnates. Its effect on personal finances can be devastating, reducing income and investments and putting citizens who have no assets to invest in the future in trouble. resist the downturn.
Fortunately, we have experienced few recessions. Por that, we know very little about how to deal with it. What and how we do for mitigate the deterioration of our assets, whether personal or corporate. Today I am preparing a guide copya and summarizea of the recommendations made by some financial experts to deal with the effects of the recession. Let's first talk about how we defend ourselves:
- Cash is KingCash is the scarcest asset in a recession and therefore very valuable. Cash is the scarcest asset in a recession and therefore very valuable. Preserve cash, use it as little as possible. Preserve liquidity, postpone expenses as much as possible and do not spend on stupid things are healthy measures. Missing investment opportunities is a sacrifice that is more than compensated if cash saves you and consolidates your assets.
- Debt from far away and, if any, at the lowest possible interest rateThis point is a corollary of the previous one. In a recession, with no income, debt payments can choke you. Debt is like swimming with weights.
- Brain kills heartIn recessions you have to be as rational and severe as possible, maybe you have to sell goods or fire good collaborators. But if you don't do these unpleasant things, you put your business or your home at risk, with worse material and emotional consequences.
- Focus on one or two critical strategiesWhen the going gets tough we tend to develop an arsenal of measures that you can't even execute well, they entangle you, wear you down and don't get you through. The ship that survives the storm usually chooses a course and a speed, and sticks to it.
- Do not raise prices or try to spend on superfluous improvements.It is rather the moment to sharpen the pencil and make it last until the end of the eraser.
- Mentalize that what is going down will not suddenly go up.Make patience your battle partner and do not sell or buy guided by emotions.
- In the stock market, rebalance your investments to what you are comfortable with what you know and where you understand the risks.
Recessions are also a source of opportunities, and many times you are better able to defend yourself by using your liquidity to consolidate or find opportunities that are only seen in those circumstances. Many fortunes have been the product of recessions as much or more than in good times.
Here are some reflections:
- Cash is a king, but also an attacking pawnIf you have cash, which others lack, you may find opportunities to lend and invest, where you can accumulate or diversify your activities or business. There may even be opportunities to approach human talent, as partners or collaborators, to help you grow.
- In the recession, the economy tends to concentrate the little economic activity in fewer people or opportunitiesThey say that the economy is like the game of musical chairs: when the music (or the economy) stops, there are chairs for people to sit on. In the recession, when the music stops, there are fewer and fewer chairs and the game is left to the few who manage to sit down. This truth is unfortunate, but it also confirms how opportunities are generated for those who are attentive and liquid.
- Study and imitate the successfulThe fortunes that have lasted are likely to have navigated several recessions. Surely their investment composition includes a percentage in recession-resilient assets. They range from fine art to precious metals and more.
- Understand the implications of the average cost of your inventories and investments.Investing is a continuous, long and exhausting game.
- Accounting gains and losses are not real lossesIf your books show assets with book values below their cost, don't grieve or despair. Understand that this is not a real loss until you sell them. And if no one forces you to do so, don't do it. The same goes for book profits. Don't celebrate book profits. Open the beer when those profits translate into money in your cash register or your bank.
- Like a ship or a plane in a storm know where you stand in your economy, business or sector at all timesUnderstand where your income comes from and where what you pay goes.
I conclude by answering something you have already thought of, why do some of the recommendations seem to contradict each other, why Cash is King but also an attack pawn? The key that ties the above recommendations together is to stay attentive, focused and as rational as you can. And as Socrates said, "know thyself".This will give you the clarity to avoid the gap and recognize a possible and balanced opportunity to your assets.
Interested in learning more, write me here!
Inquiries Mr B.
"*" indicates required fields
Share this content:
DISCLAIMER: Singular Wealth Management, Corp. and Singular Securities, Corp. (SWM&SC), offer perspectives on various markets, sectors and investment opportunities that could be valuable to subscribers of our editorial content. This includes views on different types of securities, as well as commentary on economic and political scenarios. It is crucial to understand that this publication does not constitute financial guidance and is not an invitation to make specific investments. For personalized advice, we recommend using the Unique Advisory Services through our Securities House's qualified financial advisors to achieve your investment objectives. Although the information in this publication comes from reliable sources, we cannot guarantee its accuracy or completeness. Information is current at the time of publication, but may change without notice. Investing in securities involves risks, including the possible loss of principal, and past performance is no guarantee of future returns. SWM&SC personnel may invest in the securities discussed from time to time without receiving any compensation from the companies mentioned. We disclaim any liability for damages resulting from the use of our services. Entity regulated and supervised by the Superintendencia del Mercado de Valores of the Republic of Panama. Singular Wealth Management Corp., "License to operate as a Securities Brokerage Firm, Resolution CNV- No. 219-2005 of September 19, 2005". Singular Securities Corp., "License to operate as a Securities Brokerage Firm. Resolution SMV- N° 672-15 of October 21, 2015".
