Here are 3 proven ways to get really rich during a recession – without having to risk a lot of money to do it.

Here are 3 proven ways to get really rich during a recession – without having to risk a lot of money to do it.

Some politicians have dismissed the idea that the United States is currently in a recession. But if you look at the textbook definition, it looks like we can’t avoid using the “R” word anymore.

A recession is defined as two consecutive quarters of real GDP contraction. And real GDP in the United States fell at an annual rate of 1.6% in the first quarter, followed by a decline of 0.9% in the second quarter.

Recessions are prolonged downturns in economic activity, usually associated with lower retail sales, lower industrial production, lower wages and higher unemployment.

The good news? Downturns also provide plenty of opportunities for ordinary people to build wealth.

Don’t miss

Shares

Every investor wants to buy low and sell high. A stock market pullback during a recession could be an opportune time for bargain hunters.

While the contraction in GDP in the first and second quarters was not too severe, stocks have already fallen – by a lot.

The S&P 500 is down about 20% in the first six months of 2022, marking its worst first-half performance since 1970.

Investors looking to buy stocks on the cheap may want to be cautious and focus on companies that can thrive during a recession.

Warren Buffett, for example, loaded up on shares of food giant Kraft Foods (which later merged with Heinz to create Kraft Heinz) and electric utility NRG Energy (NRG) during the Great Recession of 2008.

According to Hartford Funds, the S&P 500 has actually gained 3.7% on average during the 13 recessions since 1945.

You don’t need a lot of money to start investing. Some investing apps even let you buy fractional shares with as much money as you’re willing to spend.

Immovable

Real estate offers another potentially lucrative opportunity during a recession.

A recession does not necessarily mean that we will see a decline in house prices. But one specific factor could dampen the upward momentum in the real estate market: interest rates.

Right now, the Fed is raising its benchmark interest rates aggressively to rein in soaring inflation. Rising interest rates are bad news for real estate.

When the cost of borrowing is high, people think twice about getting a loan to buy a home or an investment property.

Real estate mogul Sam Zell – also known as the “Grave Dancer” – made his fortune buying properties when no one else wanted to.

In 1973, when the economy entered a recession, the real estate market collapsed, with many loans going into default. In this environment, Zell was able to acquire a portfolio of high quality properties at a very favorable price.

If you’ve been eyeing investment properties in recent years, a recession-induced price pullback could be a good entry point.

These days, new services make it easy for you to get into the real estate game, no matter how big (or how small) your budget is.

Starting your own business

Not everyone wants to start their own business. But according to The Economist, 47% of millionaires are business owners.

Being an entrepreneur isn’t easy, and the thought of starting a business in a recession — when other businesses might be closing — can seem daunting. But going against the grain has its advantages.

“Right now is the time to take advantage of an open field. Your competitors are stepping back and spending less money on marketing and advertising,” says Charles Gaudet, CEO of consulting and coaching agency Predictable Profits. “Some have started laying off employees. Others just sit back and hope for the best.

When there is less competition, you are more likely to establish a position in the market.

Of course, if you’re not ready to quit your job and jump right into a business idea, consider starting a “side hustle” first.

There is no magic formula to get rich quickly. Whether investing in stocks, real estate, or starting your own business, it’s important to do your own research and assess your financial situation first.

What to read next

  • Sign up for our MoneyWise investing newsletter to receive a constant stream of actionable ideas from the best companies on Wall Street.

  • If your retirement plans have been turned upside down by inflation, here’s a stress-free way to get you back on track

  • “There is always a bull market somewhere”: the famous words of Jim Cramer suggest that you can make money no matter what. Here are 2 powerful tailwinds you can take advantage of today

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Leave a Comment

Your email address will not be published.