If We're at the Beginning of a Recession, Should You Wait to Invest?

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  • Some people may be hesitant to invest right now because they think stock values will drop even more.
  • While that could happen, it doesn't necessarily mean you should hold off on buying stocks.

The quick answer? Not necessarily.

For many months now, financial experts have been sounding a warning about an impending recession. And if the economy takes a turn for the worse, it could lead to a prolonged period of rampant unemployment.

A recession could also send the stock market on a downward spiral. And given the market is already down quite a bit year to date, that's unsettling.

If you're worried about a recession in 2023, you may be wondering whether now's a good time to invest. After all, why buy stocks in your brokerage account now if there's a strong chance their value will decline in just a few months?

It's easy to see why you might think waiting to invest is your best bet. But if you ask Vivian Tu of Your Rich BFF, there's no sense in holding off if you have the ability to buy stocks today.

We can't predict the future

If a recession strikes in 2023 (and to be clear, that's still somewhat of a big "if"), it could send stock values plummeting. Or not.

The reality is that economic conditions and stock values don't always go hand in hand. Just look at what happened in 2020. The stock market tanked briefly on the heels of the pandemic before staging a glorious recovery a few months later. But at the time of that recovery, unemployment levels were still surging, to the point that lawmakers had to distribute and extend pandemic-era stimulus aid.

What this means is that even if economic conditions decline in 2023, it won't necessarily drive portfolio values downward -- or downward compared to where they are today. And so for that reason alone, it doesn't make sense to put off investing if you can afford to add stocks to your portfolio.

In fact, in a recent YouTube clip, Tu specifically said, "Unless you're a fortune teller, you should not wait" to invest. And she's totally right.

Most people don't have the ability to time the stock market -- meaning, to know when stocks are truly at their lowest point. This applies not just to ordinary investors, but even to experts who pick stocks for a living.

Because nobody knows when the market will truly bottom out, a really solid approach to investing, says Tu, is to use dollar-cost averaging. With this strategy, you invest the same dollar amount at preset intervals, regardless of how the market is performing. It's a great way to take a lot of the guesswork out of investing while ensuring you're investing consistently.

Don't be spooked by recession fears

It's possible that stock values will drop in 2023. But given they're already much lower right now than they were at the start of 2022, it makes sense to invest if you have extra money you don't need for your emergency fund.

If you buy stocks today, you won't necessarily snag them at their lowest price ever. But that's okay -- and it really shouldn't be your goal.

Rather, what you should really be asking yourself when buying stocks is whether they're likely to go up over time. If the answer is yes, then it doesn't matter if you're not scoring the lowest price. At the end of the day, you still stand to come out a winner.

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