First things first: We're not in a recession.

A recession involves a steep drop in economic activity lasting more than a few months. Usually, unemployment rises, while incomes and GDP drop. Things aren't nearly that bad right now.

But the Trump administration's trade policies have rattled the markets. Many economists are warning that the U.S. could sink into a recession within a year.

There's no need to panic yet -- but it's always a good idea to prepare yourself.

Here's what Warren Buffett, legendary investor and fifth-richest person in the world, says to do during a recession.

"Buy American. I am."

In a famous New York Times op-ed written during the Great Recession, Buffett had a simple message for Americans: Keep calm and keep investing in U.S. companies.

Fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Warren Buffett

And Buffett was right. Since its Great Recession low point, the stock market has gained about 700%. Investors who didn't sell out of panic -- or even bought more stocks while prices were lower -- went on to make huge profits.

The same goes for every recession or depression we've been through. So if there is a recession soon, you'll want to be prepared to ride it out -- or even capitalize on it.

Here's how.

A smart and easy way to invest during a recession

Investing during a recession can be tough if your income has taken a hit. But if you have cash to spare, it's the best time to invest for the long term.

Here's a simple method that limits your risk and helps you save a fortune on taxes.

Open an IRA

An individual retirement account (IRA) is an account that helps you save for retirement and keep more of your investment gains.

Here are some of their biggest perks:

• You won't pay capital gains or dividend taxes on investments held in the account.
• With a traditional IRA, your contributions are tax deductible, which means you can lower your taxable income this year.
• With a Roth IRA, you won't get a tax break upfront, but your money grows tax free -- and you can withdraw it tax free in retirement (starting at age 59 1/2).

In 2025, you can contribute up to $7,000 to your IRA (or $8,000 if you're 50 or older). And while you usually can't tap the money early without a penalty (with a few exceptions), that rule helps keep your long-term savings on track.

Buy an S&P 500 index fund

One of the simplest, safest, and all-around best ways to invest in the stock market is by purchasing shares of an S&P 500 index fund. Even Warren Buffett recommends it.

Here's what makes it a smart investment.

• Diversification in one step: S&P 500 index funds spread your money across 500 of the largest U.S. companies -- think Apple, Amazon, and Coca-Cola -- which helps lower your risk.
• Strong historical returns: The S&P 500 has averaged around 10% a year over the long term.
• Set it and forget it: These funds constantly buy and sell investments to make sure they match the S&P 500's performance. That saves you a ton of time and effort.
• Low fees: The best index funds charge next to nothing (0.03% of your investment or less).

Once your IRA is open, you can buy an S&P 500 index fund through your broker. It's best to set up automatic investments on a regular schedule, like once per month.

And if a recession does come along, consider investing extra if you can. Years down the road, you'll likely be very happy that you did.