In a recession, should I be investing?

Article author
Alexander G.
  • Updated

At Acorns, we believe one of the keys to investing is patience and consistency. If your financial condition, risk tolerance, and investment goals are up to date in your investor profile, then a recession may not typically be a reason to stop investing. 

As an investor, it can be helpful to know what happened to the stock market during prior recessions. History shows that the stock market has tended to decline right before a recession, but in many cases, it will start recovering before the recession even ends. And often, stocks are higher at the end of a recession than they were right before it started! Past performance is never a guarantee of future results, but it can be helpful to look to history when trying to understand what’s happening today. 

For long-term investors, dollar-cost averaging (DCA) is a time-tested investing strategy that can actually help you take advantage of market volatility. With DCA, you invest a fixed dollar amount at regular intervals, regardless of the price. Benefits of DCA include reducing the emotion of investing, potentially lower share prices over time, and reducing potential risk. Using DCA means that rather than trying to guess the best time to invest, you invest your money in equal portions over time, at regular intervals, regardless of the ups and down in the market. You can learn more about DCA here.

Did you know that investing $25 a week over 45 years can become $576,828 at an average compound rate of 8%, which is lower than historical averages? And investing $5 a day can grow your money significantly more than $25 a week in the long run. In this same example of investing for 45 years at an average compound rate of 8%, $5 a day can become $811,755. You can check out your potential with our easy to use compound interest calculator.

You can easily use this strategy by setting up a Recurring Investment in your Acorns portfolio. Try setting up $5 a day or $25 a week.

For more on what you can do when the market is down, check out Learn in your Acorns app.

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