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Make Your Money Recession Proof

As of June 21st, 2022; We are more than likely headed for a recession in the United States. Our goal here at the Bull Pen is to help you navigate through the downturn, explain what's going on, and make you the safest.... and most, money possible.

To help you gain your footing, we'll first talk about what a recession is. (It's not as scary as it sounds!) A recession is more significant than the scope of the stock market. It is an overall economic downturn on the macro scale.

Remember: Macro = Big economics like GDP, Micro = Small economics like personal income.

  • Since WW2 there have been 13 recessions - defined as 2 consecutive quarters of GDP decline.

  • Stocks typically bottom out 4 months before the end of a recession.

  • The most gains are made in the stock market when investors buy at the lower prices caused by recessions. (We like to call these stocks "On Sale"

  • Historically pullbacks of 20-40% only take an average of 13 months to recover.

  • Don't panic! History shows us the stock market has always rebounded and broken through its previous highs at some point.

This is a chart visualizing recessions/pullbacks and the following rebounds and corresponding period. (Forbes)

Now that we understand what a recession is, it's time to get into the fun stuff.... making money! If you glance at the picture above, hopefully, you'll see a lot more blue than red. (unless you're color blind, then just take our word for it). The blue represents gains compared to the red, which means losses.

Remember some of our basic investing principles. 1. Never try to time the market. Even though you may be nervous or antsy, the same rule applies! When people try to time the market, they often sell off good stocks before reaching peak earning potential or buy in before or after the lowest point (negating the entire attempt). What we teach is slowly but surely deploying a smaller percentage of your money, into the market at different price points to cost average the positions. 2. Just because a stock is cheaper, doesn't mean it's worse. If you are at the store a see a good quality pair of shoes for $150 and come back the next day and they're marked down to $100, the shoes aren't suddenly worse, are they? Of course not, as long as they were good quality, to begin with, more often than not, they're good quality now. The same principle applies to stocks.

Remember: Cost Averaging = Buying shares of stock at multiple price points with the goal of increasing holdings at varying price levels. Example: If you buy 5 shares at $10.00 and 5 at $20.00, your cost average would be $15 a share.

Strategies - There are two strategies to investing in a recessive market we enjoy teaching here at Bull Pen. The Pickup method and the Value method. Let's look at each:

  • The Pickup Method: This method is named after a similar phrase in the industry, "Backing up the truck". This quote refers to deploying all the cash you have and buying up as much stock as you can when you feel the market has reached its bottom. As we just discussed, timing the market can be dangerous; that's why we came up with a safer alternative. Instead of "Backing up a mack truck" we prefer to "backup" 4-6 pickup trucks, if you will. With each truck carrying anywhere from 15-25% of your ready-to-invest cash. This method promotes price diversification and allows you to itch the hole burning in your pocket, while still keeping your positions safe with dollar-cost averaging.

  • The Value Method:'s name sounds exactly like its definition.... finding and picking out value! Not everyone has enough cash on standby to make good use of the Pickup Method depending on share prices. However, if you've been eyeing a few specific stocks, ETF's or Mutual Funds, watch their 52-week lows and highs. See where the stock is as the market is tumbling. Watch the stock's Price to Earnings Ratio (P/E) decrease to a level you're comfortable with, and keep an eye on its Earnings Per Share (EPS) as always. If you think Walmart stock feels and looks good at its price point, you don't need to wait for the entire stock market to bottom out. As long as the stock fits our Bull Pen criteria checklist, historically, it's okay to proceed with a mild bit of caution. All stocks in the stock market hit lows at different times during a recession. Walmart stock might hit an entry-level price 2-3 months before the rest of the stock market does, take advantage of that!

Always keep the core principles of investing in mind, even during a recession. Dollar-cost averaging is always a safe bet, as long as you've chosen a safe stock. (reasonable P/E, solid EPS, good brand name, no bad news stories.) Recessions can be scary; don't panic! History has shown us the stock market always rebounds and breaks through its previous high at some point.

How'd we do?

-We hope this article has helped. If it did... Let us know! We are always looking for feedback and are happy to connect with readers whether it's by email or by comments on the article. Thanks for reading, and as always, let the bulls run! 🐃🐃

DOW Jones= 30,503.00 NASDAQ= 11,556.50 S&P 500= 3,765.00

What are index prices when you are reading this article?

Published on 6/22/22. Read important disclosures listed in header. This is not financial advice, simply education. Do not take this article as personalized financial advice, we do not know any given individuals personal situation and do not intend to be the deciding factor in any financial decisions.


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