If you’re wondering how to invest during a recession for beginners, you’re not alone. I asked myself the same thing during my first big market downturn. Picture this: headlines screaming about plummeting stock prices, friends pulling their money out in panic, and me — refreshing my portfolio app like a nervous tic.
It was stressful, sure. But oddly enough, it turned out to be the most educational and rewarding time of my investing journey.
Here’s how I navigated the storm and what I learned about investing during a recession — in beginner-friendly terms.
Understanding Recessions: What’s Going On?
Before I dive into my experience, let’s break down what a recession really is.
A recession is when the economy slows down for a sustained period — usually marked by two consecutive quarters of declining GDP. Unemployment rises, companies cut costs, consumer spending dips, and yes, the stock market often tanks.
That sounds scary, but it’s also part of the natural economic cycle. What goes down tends to come up — eventually.
Why I Chose to Invest During the Downturn
The Warren Buffett Advice That Stuck
I’m no finance guru, but I do follow advice from people who are. One quote from Warren Buffett stuck with me:
Be fearful when others are greedy, and greedy when others are fearful.
At the time, everyone seemed fearful. Stocks were on sale, and I realized this might be a rare opportunity to buy quality companies at a discount.
My Aha Moment
I remember staring at my screen in March 2020, watching the S&P 500 drop like a rock. I’d just learned about index funds, and instead of panic-selling like many others, I thought, Wait… if these same funds were a good buy last month, aren’t they an even better buy now that they’re 20% cheaper?
That’s when I started dipping my toes in.
How to Invest During a Recession for Beginners
Now, let’s get into the meat of it: if you’re a beginner, here’s how I suggest approaching recession investing — based on what worked for me.
1. Start with What You Know
I began with companies I understood and believed in. For me, that was big names like Apple and Microsoft. I use their products every day and could imagine them sticking around long-term.
You don’t have to be a stock picker though — in fact, if you’re just starting out, index funds or ETFs (like VOO or SPY) that track the market are a great way to invest without needing to analyze individual companies.
Pro Tip: Use platforms like Fidelity, Schwab, or Vanguard — they’re beginner-friendly and often have zero trading fees.
2. Use Dollar-Cost Averaging (DCA)
This was a game-changer for me. Instead of trying to “buy the dip” perfectly (spoiler: you won’t), I invested a fixed amount every week — no matter what the market was doing.
This strategy is called dollar-cost averaging, and it helped me stay consistent without stressing over timing.
Why it works:
You avoid trying to time the market.
You buy more shares when prices are low, fewer when prices are high.
Emotionally, it’s easier to stick to a routine.
3. Focus on the Long-Term
During the downturn, I made a rule: I wouldn’t touch the money I was investing for at least five years. That mental boundary helped me stay calm when prices dipped further.
Remember, the stock market historically recovers. Had I sold at a loss, I would’ve locked it in. Instead, I stayed put — and eventually saw my portfolio bounce back.
Anecdote: In mid-2020, my portfolio was down 18%. I kept investing. By late 2021, it had not only recovered — it had grown by over 30%.
4. Avoid “Hot Tips” and Trendy Stocks
A friend once told me to buy into a tech startup because it was “the next Amazon.” I resisted the urge (barely), and good thing I did — that stock nosedived and never came back.
Stick to companies with solid financials, or better yet, diversify through index funds.
5. Build an Emergency Fund First
Before I invested a dime, I made sure I had 3–6 months of expenses saved up. This gave me peace of mind and meant I wouldn’t need to pull money from my investments if I lost my job.
It’s hard to watch your investments drop and not touch them — but having cash on hand makes it easier.
Tools and Resources That Helped Me
- Books: The Simple Path to Wealth” by JL Collins is gold for beginners.
- Apps: I used Mint to track spending and Fidelity for investing.
- Podcasts: The Investor’s Podcast and BiggerPockets Money kept me motivated.
Common Mistakes I Avoided (Mostly)
- Panic selling: The worst move in a downturn is locking in your losses.
- Timing the market: It’s nearly impossible, even for pros.
- Overexposing to risky assets: I stayed away from penny stocks and crypto during uncertain times.
Final Thoughts: What I’d Tell My Past Self
If I could go back to when I first started wondering how to invest during a recession as a beginner, I’d say:
- “Don’t overthink it. Just get started, stay consistent, and think long-term. The best time to plant a tree was 20 years ago. The second-best time is now.”
- Recessions are scary — but they also present some of the best opportunities to grow wealth. I’m glad I leaned in when it felt counterintuitive. And you can too.
- Got questions about getting started? Feel free to drop them in the comments — I’m no expert, but I’ve been there. And if I can navigate it, you definitely can.
- Let me know if you’d like this turned into a downloadable PDF, email newsletter, or social post!
Next Article To Read: How I Learned the Difference Between Stock Price and Value