Here's Why a Recession Could Be a Good Thing for Investors

Will a recession strike in 2023? Last year, many financial experts seemed to think that was inevitable. But here we are in June, at roughly the midpoint of the year. And so far, there doesn't seem to be any major indication that economic conditions are worsening.

In May, the U.S. economy managed to add almost 340,000 jobs. That's not exactly a sign of trouble. 

But still, many people in tune with the economy think things could worsen as 2023 chugs along. Even the Federal Reserve insists that a recession may be on the horizon.

It's a good idea to prepare for a recession by boosting your savings account balance in case you lose your job. But you may want to pump more money into your brokerage account as well. Here's why.

It's all about opportunity

The scary thing about a recession is that it's hard to predict how broad an impact one might have. Often, a recession will mean an uptick in unemployment. Now, some industries tend to be fairly recession-proof, like healthcare and education. And a mild recession may not drive so many people into joblessness. But still, unemployment is a concern.

A recession also has the potential to batter the stock market. This isn't guaranteed to happen, but it's a potentially concerning side effect. 

That said, a recession also has the potential to be a good thing for investors. If an economic decline leads to a drop in stock values, it gives investors a chance to scoop up stocks on the relative cheap. And that could lead to a world of opportunity.

Let's imagine you've been eying a company whose stock is trading at $200 per share. If a recession hits and pounds the stock market, that company's share price might drop to $180. 

Now, let's say you buy 10 shares at $180 for a total of $1,800. If that same stock then not only recovers its value, but gains value to the point where shares are worth $220 apiece, you have the potential to enjoy a sweet $400 profit. 

Look at the silver lining

Nobody wants to see the economy take a turn for the worse. The idea of losing a job is scary, and the idea of seeing your portfolio drop can be almost as unsettling. 

But if a recession does end up hitting at some point in 2023 or beyond, the good news is that it may open the door to a world of opportunity for investors. To prepare for that, pump some extra money into your brokerage account so you have a chance to jump on discounted stocks once they become available. 

That said, it's extremely important to have a fully loaded emergency fund ahead of a recession. If you don't have enough money in savings to cover at least three full months of essential bills, boost your cash reserves there before adding funds to your brokerage account.

But if you're all set on emergency savings, it's a good time to beef up your brokerage account balance. That way, you can put your money to work if the opportunity arises.