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A recession is known for being a time of stress and uncertainty. Most of us will try to carry on with our daily lives as normally as possible. But for some of us, that can be hard to do.
There’s a chance that you may suffer a pay cut, unemployment, and financial hardship.
This means that you might have to change your lifestyle — trimming all the extras. This can mean slashing back on dining, travel, entertainment, and extracurricular activities.
What will the personal impact look like? Well, it all comes down to your budget, as well as your current financial standing.
Necessity items are products that you need to live on — food, shelter, warmth. Regardless of your social class, you will carry on spending money in this area.
Meanwhile, you don’t necessarily need comfort items to live on, but you will tend to purchase these products nonetheless. For example, alcohol consumption can experience an increase during a recession.
Luxury items are purely optional. You tend to purchase them only if you have a healthy income and healthy savings. For example, a new car, new jewelry, or an expensive holiday abroad.
Where does the money go in a recession?
During a recession, most people will buy less luxury items. However, they may choose to substitute those purchases with comfort items instead. Comfort items may experience an increase in revenue. For example, if a woman can’t afford to visit a hairdresser, she may attempt to purchase a DIY hair dye from the supermarket instead.
But is this the only industry that will profit from altered purchases?
The IT sector may experience significant movement as well. For example, during the COVID-19 pandemic, we saw a complete change in consumer behavior. People could not buy items normally because of quarantine lockdowns. They turned to online shopping instead. As a result, cloud-based technology flourished — with more resources being devoted towards the online experience.
So people will still be spending money, but they will be switching their spending patterns. So some industries may be negatively correlated to one another.
What types of people become rich during recessions?
When there is a crisis, there is also an opportunity. There will always a few exceptional people who take advantage of a recession to pounce on openings to invest.
Are these just the one-percenters?
Are they the fearless?
Are they the smartest?
Now, some of you might have seen the movie The Big Short. It’s the real-life story of how the greed in the financial market created an asset bubble on risky lending. This led to the great housing market crash of 2007.
In the movie, Michael Burry figured out that the loans looked too good to be true. He ended up shorting the financial sector — and making a fortune.
Yes, Michael Burry was smart and fearless. He arguably belonged to the 1% who knew that the market would crash. So he went big and embraced the risk.
People who spot unseen opportunities beyond the radar can often benefit, even during a recession.
How can you benefit during a recession?
Remember: Michael Burry is just a person like yourself. If he can spot an opportunity, so can you.
It is no secret: during the COVID-19 pandemic of 2020, stock markets around the world plunged in late March before bouncing back. This created fresh opportunities for savvy and brave investors to tap into.
Has this stirred your interest?
The good news is you don’t have to speculate. You don’t have to take an enormous risk. You don’t have to gamble with large sums of money.
You can actually start growing your wealth by taking small, measured steps. And the best way to do this is to start following the latest stock market news, so you can get the right analysis on the best stocks providing value and growth.
Are you keen to generate passive income? Why not visit Wealth Morning — which is a one-stop solution to help you uncover wealth opportunities beyond the radar.
The financial research is already done for. You just need to get your foot in the door.
Image credit: https://www.bptrends.com/
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