Millionaires are Made During Recessions: What's your strategy?

[Max Emory]

It's cliché, but true. A lot of millionaires are made during recessions.

No matter what you invest in there are and will always be golden opportunities to take advantage of during every recession. For me, it's real estate and a few other ventures. For you, it may be crypto/stocks/businesses/real estate/etc.

How are you preparing to come out of this recession 10X wealthier than you are right now to be able to take your family and circle to the next level?

Do what most other people are not doing. This is the time to find that opportunity and double down.

What are you strategizing to execute during this "recession"?

[Scott Trench]

My strategy: 

Every investment is a lifetime investment. Because I am investing in assets and asset classes that I expect to generate returns in excess of inflation over extraordinarily long time periods, all I have to do is:

- Make sure that I continuously maintain a large surplus net of income/expenses with each passing month

- Maintain a fortified emergency reserve that can withstand recessions (reminder that Lines of Credit dry up in recessions, as many investors are seeing right now! There is no substitute for CASH)

- Regularly deploy the excess cash, on top of my strong cash position in quality investments that are likely to stand the test of time (like the American economy in broad based index funds and real estate in excellent locations that I can maintain well. If I can't hold the investment for a lifetime or longer, I'm generally not interested (although I will pick up a briefcase full of money in the rare circumstances where they are left lying around of course). 

What am I doing in the recession we are in right now? Continuing to save, earn, and invest consistently in index funds and real estate. Continuing to work at my profession (BiggerPockets) and making this company the best it can be. 

One BIG note however: As interest rates rise, we are approaching an inflection point where purchasing real estate using DEBT can actually dilute/hurt returns. I am much more likely to purchase all cash real estate out of state in the coming months, than to continue purchasing property here in Denver, CO, because according to my math and the BP calculators, high interest rate debt REDUCES my CAGR on many real estate investments with conservative growth assumptions. 

My long-term strategy does not change, but I will shift away from using debt if it is likely to hurt my returns AND increase my risk profile in the near-term.

If you are interested in exploring this nuance (how debt can actually REDUCE returns), run a calculator report and play with the interest rate. See where the inflection point is, based on your assumptions as the interest rate increases. At a certain point, it is worse to use debt than to purchase a property with all cash from a CAGR standpoint.