The Upside of a Down Economy

Published April 6th, 2008

Here in North America some people are starting to get nervous about the word recession–if they aren’t already. In my home province of Ontario here in Canada, one of the big five banks just released a doom and gloom report that Ontario will be in a temporary recession. I’m by no means a financial expert, just a regular person, but I look at this “recession” as a good opportunity. You should consult a professional when it comes to your specific portfolio, but I’ll give you my personal perspective on the situation.

This site is all about finding value and getting more out of the things that are a part of your everyday life. I believe that if you’re investing for security, whether it be your retirement or your children’s education, you need to think long term and look at the big picture. In the grand scheme of things you should buy low and sell high. If you are confident in your investment choices and know your stuff, then you can embrace this dip in the value of your stock or mutual fund, because you’ll be getting a great value to buy more of a good product. The markets, like everything else in life, work in a cycle, with ups and downs–right now we just happen to be going into the down. Also, in general, if times are tougher then maybe it’s a good idea to search for more value in all areas of your life such as food, fuel, utilities, insurance and spending for other basic needs.

If you’re one of those people who doesn’t know whether to stay or go, buy or sell, I can offer only one big piece of advice: If you don’t understand the big picture, then you need to learn and learn fast. Get to know your investments. What expenses do you pay to own or sell them? Things like MER (management expense ratio), whether or not there is a load on the mutual fund and what type are important. How has it performed for you? How is it rated by www.morningstar.com or www.morningstar.ca? Once you’ve learned all about your investments ask yourself one big question: Now that you have all the info–would you buy this stock or mutual fund again? If yes, stay put or buy more, if no, then go ahead and sell some or all of the investment.

Some people will be better prepared and less affected by a downturn in the economy than others. Regardless, it’s best to be prepared, and never too late to make changes. One big thing you can do is to not pay more for the same product or service. Sometimes we end up paying more for the same things for the sake of convenience. You may want to consider shopping at a less glamorous grocery store, plan your meals and make them from scratch, consciously make an effort to use less gas, or shop around again for your home, car and other insurance premiums. If you’re looking for money saving ideas you can check out my posts on 25 Ways to Save Money and My 25% Grocery Savings Rule to get you started.

The bottom line is that the economy will bounce back and grow from this correction, and hopefully someday in the near future be on the upswing again; when this happens, maybe you’ll have gotten some great deals by buying low and having made some lifelong money saving habits. Just remember–the most successful everyday millionaires are people like you and me, who have found ways to get the most out of the money they already have, while looking at earning more–they always keep an eye on the big picture.

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