In the Good Times, Prepare for the Opportunity Coming in the Bad Times

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Randon,

Right now, we are in one of the longest bull markets in the history of our country.  The stock market has pretty much gone up every year since the Spring of 2009 (with a couple of flat years in there) and the housing market has been going up significantly since 2012.  There are now “We are hiring” signs everywhere, whereas from 2008-2012 finding a job was elusive and a good job was hardly existant.

We as humans have such very short memories.  I am already seeing the kind of spending and lifestyle inflation that assumes these good times will last forever.  They will not.  They may last another 10 or 20 years, or they may end next year.  No one truly knows.

However, what we can know is that bad times will come again and it is what you do in the good times that will dictate whether the bad times are “bad” or full of opportunity.

Downturns are nearly always full of tremendous opportunities for the long-term, prudent investor.  The current housing market that we live in, the greater Portland, OR area, has nearly doubled since its bottom in 2012.  Many were hurt by the Great Recession but some, through years of good financial habits, were in a place to purchase steeply discounted investments during the recession.

This is not market timing.  I do not suggest that you jump in and out of unpredictable investment markets.  That is a recipe for disaster and extreme stress.  This is a focus on prudent, long-term investing.

I am not suggesting that you let yourself be crippled by the fear of the impending downturn and therefore do no investing now.  This has also happened to many people who sit on the sidelines for far too long and miss out on years of good markets.  Much the opposite.  What can you do now to ensure that when times get lean, you will not feel it as much, or, even better, be in a position to seize the many opportunities that present themselves?

Look for ways to increase cashflow and reduce risk now.  Pay down debt.  Save a large percentage of your income.  Purchase cash-flowing investments, whether that be stocks, bonds, real estate, etc.  Increase your income from your day job.  Reduce what you pay in taxes.  Ensure you have access to liquid investments while still allowing them to work for you now.  Do not let your lifestyle inflate to unreasonable levels that will hurt when a downturn happens.

Making the little important decisions when times are good will help you reap exponential benefits when times are bad.  Not only will this present opportunity financially, but it will also put you in a position to help others struggling in difficult times, which is a very honorable calling.

With love,

Dad