COLUMN: Ask the Money Lady – Recession a great time to invest

Dear Money Lady,

Do you think we’re going into a recession? Roy L.

Hello Roy, YES – and it’s a great time to invest. Here’s a quote from James O’Shaughnessy: “Fear, greed, and hope have destroyed more portfolio values than any recession or depression we have ever been through.”

I know most people are upset when looking at their retirement portfolios these days and with our current economic environment we may be in for a much longer ride on this uncertainty-rollercoaster. It’s very hard to be a Canadian investor today with the Trump tariffs, the looming election and all the nonsense about annexation with the U.S. But, with all that going on, please remember that even though it may feel somewhat counterintuitive to many millennial investors, recessions can be a great time to maximize your wealth. If you can, maximizing your RRSP now would be a great investment move.

During recessions, securities undergo significant pressure from the Bank of Canada, punctuated by unemployment scares, lower income projections and increased inflation. Recessions force people to reduce consumer spending causing stock markets to suffer significantly. Sprinkle in a little global uncertainty, maybe some overseas civil unrest, and a war or two and you’ve got the perfect recipe for a down-home-depression.

Now I don’t mean to upset any of my readers, but please remember that since the 1900’s the average length of a recession is only 17 months. The longest recession was in 1929 which lasted 43 months and since then the second longest was 18 months in 2008. Many investors get spooked by the “R-word” and run around like chickens proclaiming that the sky is falling. Honestly, by remaining invested and then adding to your portfolio during these times, you can significantly increase your wealth over the long term. Let’s look at some facts. Here are the cumulative returns after significant recessionary events.

1929 Great Depression = +365% 5-year cumulative return

1982 Recession = 275% 5-year cumulative return

1994 Recession = 250% 5-year cumulative return

2009 Financial Crisis = 180% 5-year cumulative return

I know these current times are unnerving and most Canadians believe that this time it could be different. It’s not. The stock market will recover. The real estate market will recover. Believing that these events we’re immersed in now are so different from those in the past and that today’s market will never recover is truly a false narrative. If you don’t want to increase your portfolio now as suggested, your next best course of action is to do nothing. Running for the exits, although you may want to, will never make you wealthy.

Christine Ibbotson is a Canadian author, finance writer and syndicated money coach on BNN Bloomberg. She is also part of the everyday lineup on CTV Your Morning in every province. If you have a money question you want answered free – send it to: info@askthemoneylady.ca.