Are you prepared to invest if the market crashes?
Historical precedent indicates that the likelihood of a soft landing is low.
The US Federal Reserve’s (The Fed) soft-landing narrative is dissipating quickly, as some — including those at The Fed — are starting to believe that a recession is all but inevitable.
The Federal Reserve Bank of St. Louis reports that there’s a 50-65% probability of a recession within the next 12 months, while 67% of respondents to a recent Finder.com survey say a recession is likely within that same time frame.
So, if we are headed into an economic downturn that causes financial markets to crash or just simply trend lower, are you prepared to invest when asset prices fall?
With stocks like NVIDIA (NVDA) up over 200% year-to-date and major indices like the Invesco QQQ Trust (QQQ), which tracks the Nasdaq, up about 40% in the same period, you might feel as though you missed the boat, as asset prices have rebounded significantly in 2023 after hitting lows by the end of 2022.
But if asset prices head south as we enter a recession, you may get an opportunity to buy those assets you wished you bought a year ago at a discount.
If this sounds appealing to you, you’ll want to do the following four things to prepare:
1. Choose a trading app
Finding the best trading app in 2023 for your investment strategy can be a process. So, it’s best to engage in this process before buying opportunities present themselves.
Consider whether you’re looking for an app that provides access to financial products, services and features like options contracts, forex trading, and/or detailed stock analysis.
You might also find that using two or more apps helps execute your investment strategy. One app may give you access to futures trading, while another provides access to crypto assets. Test out a few apps to determine which are best for you.
2. Get comfortable using the app
Once you’ve chosen the best apps for you, get comfortable using them — especially if you plan to use them to trade more complex financial instruments.
For example, if you plan to use Webull to trade options contracts, you may want to use the app’s paper trading simulator first. This feature allows you to trade options contracts without using real money.
And when you practice with the paper trading feature, you not only get a better feel for how the app works but also a better sense of the opportunities and challenges that come with trading particular assets.
3. Make a list of assets you want to buy
Write down the assets you’d like to buy as well as the price levels at which you’d like to buy them. And I don’t mean “make a mental note.” Either put pen to paper or create a digital document that serves as a shopping list in the event of a significant market downturn.
Getting your investment strategy out of your head and onto either paper or a digital spreadsheet will help you execute your strategy better when buying opportunities present themselves.
4. Check to make sure the assets you want are still available
With a newer asset class like cryptocurrencies/digital assets, you’ll want to conduct frequent checks to make sure that certain crypto assets are available in your preferred app(s).
For example, in June 2023, Robinhood announced it would be delisting the following crypto assets: ADA, MATIC, SOL. While something like this doesn’t happen frequently, it’s still important to keep yourself updated on which assets are available via which apps, especially regarding cryptos.
Also, if you live in a restrictive crypto jurisdiction like New York State, you’ll also want to make sure that all the crypto assets the app supports are available to you as a New York resident. For example, while SoFi supports 22 crypto assets, those living in New York can only purchase five of those 22 assets via the app.
Invest like the best
The best investors in the world see market downturns as buying opportunities.
Berkshire Hathaway, a holding company headed by famed investor Warren Buffett, is sitting on its highest-ever cash and short-term Treasuries balance, which could indicate he feels a market downturn is looming.
Buffett is well-known for the quote, “Be fearful when others are greedy and greedy when others are fearful.”
Right now, while investors don’t necessarily seem greedy, they also don’t seem particularly fearful, especially as major media outlets continue to echo The Fed’s messaging that we may face a “mild” recession in the not-so-distant future.
Keep in mind, though, that former Fed Chair Ben Bernanke employed the exact same messaging in April 2008, just months before The Great Financial Crisis ensued.
So, if you believe we’re on the verge of a notable recession, prepare yourself now to take advantage of lower asset prices instead of lamenting them when or if we see them soon.
Written by Frank Corva
Frank Corva is a cryptocurrency writer and analyst for digital assets at Finder. Frank has turned his hobby of studying and writing about crypto into a career, with a mission of educating the world about bitcoin and other digital assets. As someone who’s lived and traveled all over the globe, he loves the idea of the world being connected by a neutral, apolitical and borderless network and digital currency like Bitcoin (BTC).
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