A recession will eventually come. What will you do when it hits?

I have an iron-clad prediction to make: a recession is coming.

By not putting a date on this prediction, it’s 100% correct. A recession will come. Pundits will debate when it will happen, but we can be assured that it will happen at some point.

The last recession was particularly rough. Historians say it was the worst since the Great Depression, hence the term Great Recession. And with that as the most recent recession experience, people will be cautious when the downturn comes.

I consider my adult life to have started in the year 2000. I graduated college and went to work for a tech company. I did what a good, financially responsbile person was supposed to do: I maxed out my 401k from my first day on the job.

Then the dot.com bubble burst. My company and portfolio imploded. The best investment I made back then was in savings bonds. Yes, savings bonds. They’re still paying about 6% interest to this day.

The dot.com bust colored my experience. I kept a lot of cash on the sidelines and was very conservative in my investments. Then when the Great Recession hit, I piled into the markets. I invested all the way as the market dropped.

The market doubled in value in short order and I felt smart. But I realized that the market’s gyrations were tied in lock step to government decisions and pronouncements, not the reality of the underlying companies in the stock market. This gave me an uneasy feeling and I became a conservative investor again. I thought Dow 14,000 was way to high and pulled off my stock investments.

In hindsight, this was a stupid thing to do. I learned another lesson: the government will do all that it can to prop up the markets. Since then, the government has done more than just backstop against wild drops and recession; it has propped up the market with both fiscal and monetary stimulus.

So after nearly 20 years as an “adult”, I now realize that the government is more powerful than the markets.

As for domain investing, what can you do as a domain investor when recession hits?

I recently sat down with a financial advisor to look at how I should prudently invest my money. How I should look at the long term. We talked about investing in the stock and bond markets, but also alternative investments.

She cautioned against going to heavy into alts. It dawned on me that I’m actually very heavy in alts even when you exclude things like real estate investments. Domain names are an alternative investment.

We’ve seen a lot of good domain sales lately for premium, one-word domains. Startups are snapping these up. What happens when startup funding pulls back? Will this significantly impact these sales?

If they do, it might be a buying opportunity for domain investors. The ones who have cash available.

On the other hand, with recession comes layoffs. People who lose their jobs often start their own business and buy a domain name to do it. But these aren’t the people that will spend hundreds of thousands on domain names.

While you don’t want to hold onto cash forever, you should think about how you want to deploy it when times are frothy.