The economy is looking pretty shaky in 2023. High inflation, the Federal Reserve raising rates, and the stock market suffering over the past 12 months or so. But the world’s best investors have been busy buying into the market while most other investors have been selling. They follow a strategy of investing heavily during weak economic periods, and in hindsight, it has worked incredibly well. In this article, we’ll discuss the three fundamental rules to remember to make sure you come out on top and get rich in the 2023 recession.
Rule #1: Look for companies with a durable competitive advantage
In times of high inflation and economic weakness, it’s essential to look for companies with a durable competitive advantage, also known as a “moat” in business terms. Being first or something might work for a while, but it doesn’t work forever. What you need to look for is an intrinsic characteristic of a business that permanently sets it apart from its competitors, something that another company can’t replicate no matter how hard they try. Businesses with a brand mode are some of the best businesses to own as an investor in tough economic times. Essentially having a moat means people are coming back to your product or service and won’t switch to an alternative. That’s handy because when people are tight on cash, it means they won’t buy the cheaper product; they’ll still buy yours.
Rule #2: Invest in good management
Investing in good management is crucial, especially in tough economic times. Management is responsible for the long-term growth of the company, and you want to invest in companies that have strong, honest, and capable management teams. One way to evaluate a company’s management is to look at how they allocate capital. A good management team will be responsible with capital and make sure it’s put to good use to grow the business, rather than wasting it on frivolous expenses.
Rule #3: Invest in businesses with a long runway
When investing in a business, it’s essential to look for those that have a long runway. This means that they have significant growth potential and can continue to grow and compound for many years. You want to invest in businesses that can reinvest their earnings back into the business, rather than paying dividends or buying back stock. Companies with a long runway have more significant opportunities for growth, and this growth can be translated into higher stock prices.
In summary, the 2023 recession is coming, but don’t panic. Instead, take this opportunity to invest in companies with a durable competitive advantage, good management, and a long runway. Remember that being first or having the best product or service is not enough to succeed in business in the long run. You need a durable competitive advantage or moat to protect your business and your investment. And finally, always invest in good management and businesses with a long runway for growth.
Investing during weak economic periods can be daunting, but with the right strategy, you can use it to get rich. The three investing rules discussed in this article can help you make the most out of the 2023 recession and achieve your financial goals. So, start looking for businesses that have a durable competitive.