3 Ways To Profit in a Recession, According to Humphrey Yang

Economists at J.P. Morgan are predicting a 60% probability of a recession happening this year. The threat of a recession can feel scary for many people. When the economy starts to wobble, it’s easy to panic and make quick decisions that could hurt you in the long run. But instead of panicking, preparing for it is the best way to survive and potentially profit in tough economic times.

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In a recent YouTube video, Humphrey Yang, a former financial advisor turned creator and entrepreneur, shared three strategies to profit in a recession.

During market downturns, it’s tempting to pull all your money out to avoid seeing more losses. But Yang warned that this is one of the costliest mistakes you can make.

“The biggest mistake you can make when it comes to investing is … not staying invested on the big days when the market is up,” he said. This is because those big gains, he said, will make up for when the market is down.

According to Yang, the stock market moves between -1% and 1% on a daily basis, and it’s rare for the stock market to move more than 3% in any direction. So if you miss a few of those rare days, your returns can take a huge hit.

“If you miss just 10 of the best days in the market in the past 30 years, you could erase your gains by 54%,” Yang explained. “Missing 20 days will cost you 73% of your total gains, and missing 30 days will result in 83% less.”

In fact, according to Charles Schwab, if an investor moved their portfolio to cash for just a month after a market drop of 20%, their returns would be cut in half a year later.

While the stock market may be shaky during economic turbulence, staying invested even when it feels scary is crucial. “The old adage ‘Time in the market beats timing the market’ is undoubtedly true,” Yang said.

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Wild market swings are common during recessions, which can rattle even the most seasoned investors. Yang, citing the Financial Samurai, emphasized that we are always subject to volatility as long as we risk money in the stock market. It’s not something you can control. It’s something you have to accept if you want to succeed.

“Market corrections and significant downturns are a normal part of investing in stocks, and you must accept volatility if you want to be a successful investor,” Yang said.

Timing the market is almost always impossible. That’s why Yang recommended dollar-cost averaging, a more reliable investing strategy. He explained that it’s the best strategy for making money in the stock market.