Answering Your Investing Questions

Let's debunk some investing myths!

Author

Michela Allocca
April 29, 2025

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MONEY
Answering Your Investing Questions!!

We’ve seen a lot of stock market volatility over the last few weeks, and I know it’s making people a little nervous.

If you didn’t know, I actually worked in finance for 5 years, 3 of which were in investment research. I also took the CFA exam (Level 1 and then changed careers) and passed on my first try.

So while I wouldn’t consider myself a lifelong investing expert, I definitely understand the market and have learned how to stay the course during these times of volatility and uncertainty.

A few weeks ago, I posted a question box on my Instagram for you to submit your investing questions. Today, I am going to answer a few of the most popular ones and hopefully it will give you a little peace of mind.

1️⃣ What is the actual definition of a recession?

There are A LOT of words that are thrown around on social media, so let’s talk about the true definition of a recession.

A recession is defined as two consecutive quarters of negative GDP (gross domestic product) growth. Based on some initial research, it looks like GDP in Q1 did decline.

It is to be seen if the tariffs that were recently imposed will impact the economy enough to see another quarter of negative GDP growth (it is looking likely.. but no one can predict the future).

So it’s still too soon to tell if we will enter a recession later this year. Nevertheless, it is super important to make sure you’re taking steps to mitigate your personal risk by:

  • Creating and sticking to a budget

  • Increasing your emergency fund

  • Reducing high-interest debt

I share more tips about how to navigate a recession here. And I also have a free recession guide that you can download here.

2️⃣ Can you explain downturns in the market?

A stock market downturn typically happens where there is a continuous decline in stock process, measured by major indices like the S&P 500 (which you have likely heard of).

The decline in stock prices can be caused by a variety of factors, such as recession fears (which is a byproduct of what the recent decline was), geopolitical conflicts (like war), natural disasters, market sentiment, company performance, or monetary policy changes.

How the markets recover depends on investor sentiment and indicators. Generally, after the market bottoms out (the pressure eventually will exhaust itself), investors will begin purchasing stocks they believe are under-valued.

This can be accelerated by intervention by the government or the Fed, and eventually, more investors re-enter the market and we start to see a new upward trend.

What is most important to remember is that the stock market is highly influenced by behavior and emotion. I know it feels a lot more complex than that, but at it’s core, it’s not. Don’t let it intimidate you!

3️⃣ Should I invest more during a recession if stocks are low?

So to be honest, I can never say for sure yes or for sure no. No one can. There are some potential benefits of investing during a market downturn, and you need to evaluate them based on the context of your current situation to decide if it makes sense for you.

  • Lower prices: Generally stock prices are lower and may offer increased long-term value if you buy low

  • Long-term perspective: historically, markets have recovered from every downturn

Ultimately, if you are feeling financially confident (you have an emergency fund, job security, and a long time horizon for investing) you could consider investing during a down market.

Personally, my investing strategy doesn’t change based on market conditions. I will continue to be investing in low-cost index ETFs every month regardless of what is happening in the economy and the news!

WEEKLY RECOMMENDATION
What IS Underconsumption?

Last week, I was on CBS NEWS!!! And we discussed underconsumption: what is it and how can you practice it? It was such a cool experience for me but also an incredibly insightful conversation if you are someone who is interested in the Buying Less and Buying Better movement!

SPONSOR
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RESOURCES
What’s Happening This Week at Break Your Budget

  • This week on Don’t Depend on Daddy: It was a fun one - I shared a few things that I think are incredibly chic. I’ve been seeing this trend float around on TikTok over the last few weeks and it felt so fun to hop onto the trend! Enjoy!

  • My Money Spending Rules: This week I am sharing my formulaic financial rules that guide my overall strategy, along with some spending rules that help me decide what I will and will not buy!

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xoxo,

Michela