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Recession Investment Plan: A Simple Guide To Thrive In A Bear Market

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I’ve come up with a Recession Investment Plan.  This strategy takes the emotion out of investing and helps you capitalize when stocks are cheap!

There’s been a lot of talk about how a recession will be the end of the FIRE Movement.  However, I believe it’s quite the opposite.  The FIRE Movement is in a unique position to thrive during a recession. 


Investing For Financial Independence

This is an issue I haven’t seen addressed in the FIRE community.  How to handle buying investments during a recession.  We all know from the greats like JL Collins that we should:

  • Never Panic Sell
  • Buy More Stocks When They Are On Sale

The problem is…

How do you know when and how much to buy?

The average recession lasts 1.5 years and the market can look like it’s recovering several times in between.  This plays with investor’s emotions. 

Let’s say someone has a 6-month emergency fund and wants to invest an extra $10,000 while stocks are on sale.  

They could get overly excited by a decline of 10% in the market and buy $5,000 worth of stocks.  A few weeks later the market could decline an additional 5% and this person invests another $5,000.  Now they are out of money and the market drops an additional 20%!

Unfortunately, they’re left with no money to capitalize on this great opportunity!  To make matters worse they are likely filled with anxiety and regret over the decision to buy at random times based on emotion.

Having a Recession Investment Plan

  • Prepares You To Capitalize On Opportunity
  • Helps You Invest Without Emotion
  • Buy More As Prices Go Lower


What Is A Recession Investment Plan?

The best investment plan during a bear market or recession is to put your money to work right away.  On average the stock market goes up more than it declines, so mathematically this is the best option.

The saying “Time in the market beats timing the market” is completely true.  If you have a lump sum of money, history shows the best option is to invest it right away.

However, doing this in a real-life scenario can be nerve-racking!  Imagine the anxiety and feeling of regret if you invest the whole lump sum and the next day the market declines by 10%.  Making the right decision is about factoring in math AND our emotions.

That’s why I came up with the Recession Investment Plan & Spreadsheet.  It merges investor discipline and emotions very well. 


How Does This Recession Investment Plan Work?

The Recession Investment Strategy works by helping you buy stocks at certain price intervals and buying more the further their price declines.  This helps prevent you from running out of money before the stock market bottoms.  This also allows you to maximize your investments when stocks are at their cheapest!

Recession Investment Plan

  1. Have An Emergency Fund
  2. Continue Regular Investment Contributions
  3. Choose Asset To Purchase
  4. Complete A Recession Investment Spreadsheet
  5. Use The Spreadsheet To Invest


1. Emergency Fund

It’s important to note, during a recession or bear market, many people lose their jobs.  During this time, everything gets bad quickly.  So, first and foremost you should always have at least a 6-month emergency fund.  This protects you and your family during difficult times.

The good news is we in the Financial Independence Retire Early (FIRE) movement, are a bunch of well-prepared people. 

That usually means we have the resources to not only survive a recession but also thrive in one.


2. Continue Regular Investment Contributions

This plan works best for individuals who have a lump sum of money and want to take advantage of stocks being on sale.

To put it another way, this plan is specifically for additional money that you would like to contribute towards investments.  (aside from your regular automatic contributions)

So, this does not apply to 401k contributions, which should remain the same regardless of what the stock market is doing.

You also shouldn’t be changing your investment philosophy or risk tolerance.  Every investor should take the time to complete an Investor Policy Statement.

This helps you stick to your plan when times get difficult and can cloud your judgment.  I complete an Investor Policy Statement and before making any significant decisions I look at it to make sure it aligns with my goals.

Investor Policy Statement

Download The Investor Policy Statement I Use For Free

3. Choose Asset To Purchase

Identify which stock, index fund, or exchange-traded fund (ETF) you would like to purchase.  I suggest sticking to an index fund or ETF for the broad diversity those options offer.  It’s also easier emotionally to handle investing in a recession when you are buying the total stock market like VTItotal stock market like VTI, instead of a single stock that can go bankrupt.

For that reason, I use VTI as an example later in the article.


4. Complete A Recession Investment Spreadsheet

The next step is to download and complete the investment spreadsheet.  You can get a free download of the Recession Investment Spreadsheet I use with all the equations built-in.

Everyone should take 5 minutes to set up a Recession Investment Plan.  This protects you against your own emotions and market timing tendencies.  I’ll be giving you an example of exactly how to set it up.


5. Use The Spreadsheet To Invest

The spreadsheet gives you date and price targets for when to invest.  You would simply refer to the spreadsheet and follow the investment plan.  The emotions are taken out and all you have to do is invest according to the plan.

Keep reading because later I’ll show you how to take this one step further!

Next, I’ll be showing you the spreadsheet and how to set it up.


Recession Investment Plan Template

Let’s say we are in a recession or bear market.  However, this time we are prepared with a Recession Investment Spreadsheet.

Now, we would simply refer to the spreadsheet and follow the plan.

We can use the Vanguard Total Stock Market ETF (VTI) as an example:

Example Recession Investment Plan

Fill In:

  1. Amount Of Money To Invest  ($10,000)
  2. Asset Price At The All-Time High  ($172.17)
  3. Next 10 Months


VTI hit an all-time high of $172.17 on February 19th.  Therefore, you would follow the investment plan once there is a decline of 20% from the high which is considered bear market territory.

Following the Plan

  • March 12th: You would have purchased $600 and $700 when VTI closed at $124.59

That day VTI fell enough to hit both the 20% and 25% buying levels.

VTI on March 12th graph

  • March 16th: You would have purchased $800 when VTI closed at $120.46

VTI March On 16th

  • March 23rd: You would have purchased $900 when VTI closed at $111.91

VTI on March 23rd


After that, VTI rebounded sharply.

If VTI doesn’t hit the price target of $103.30 by August, then we would make another purchase.  

We don’t know where the market is headed, but having an investment plan in place allows us to be more disciplined investors.  When markets get volatile, the FIRE movement can refer to our recession investment plan instead of investing on emotion or trying to time the market.


Example Without a Plan

Now let’s say on March 12th, VTI was more than 25% below an all-time high, but you don’t buy because you feel it’s headed lower.  The next day VTI goes up more than 5% and Fear Of Missing Out (FOMO) kicks in, so you BUY!

Over the next few days, the market zig-zags lower.  You feel like you let your emotions get the best of you.  So you decide not to buy until you can start seeing a market bottom.  Then, after March 23rd VTI soars higher.

In this case, you only bought once when VTI was around 20% off the all-time high. 

During that time you were probably filled with stress and anxiety, trying to time the market.  On top of that, now you have a feeling of regret for not taking advantage of the low price on March 23rd.

Of course, this is just one of an unlimited number of scenarios that could have played out. 

However, without a recession investment plan, they all would have relied on emotion and market timing.  Why not set up an investment strategy and stick to it.  That way, you can remain calm, while everyone is going crazy guessing if the market will go up or down.


Automate Your Investments

You can take the investment plan one step further by setting buy limit orders for all of your price targets.  

Buy limit orders are when you predetermine a price that you are willing to buy a stock.  Once that price gets met, the stock automatically gets purchased.  

This way you wouldn’t even have to look at the market daily.  Once the limit orders are met, you receive an email with the confirmation and continue to enjoy your day.

Once the market bounces back, you will be happy you automatically bought more as the market kept going lower.


Adjusting The Plan

For my plan, I stopped at a decline of 65%.  I couldn’t envision a decline of more than that.  Especially with all the assistance from the federal reserve to keep the market up.  You can always adjust it. 

The important part is to have a plan in place and stick to it during the emotional roller coaster of a recession/bear market.

The beauty of the Recession Investment Plan is the lower the market goes the more money you have to buy. 

This allows you to invest more as the prices of stock get more attractive.  This solves the problem of investing too much too soon in a bear market.  Which leaves you with no money left if prices continue to fall.

Recession Investment Spreadsheet Download

Download The Recession Investment Spreadsheet

I think everyone in the FIRE Movement should take 5 minutes to set up a recession investment plan.  It protects us from our own emotions and helps us continue to thrive in difficult times!


Let Me Know What You Think In The Comments Below ⇓


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This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.