Being in an economic recession is no fun, especially for stock investors. In fact, many people who own stocks don’t know what to do when a recession hits. Usually a stock investment strategy relies on the fact that the market will grow. At least that’s what everyone assumes about the market. But the reality is that you can make money in both a bear and bull market.
First of all, if you have money in equities, get it out at the beginning of a recession. Sell on it’s way down until the bottom hits. Make sure you are confident that the market has hit the floor before you start trickling back in.
After you take your money out of stocks, put it in a safe haven investment. There are asset classes that skyrocket in a bear market. These would include cash, I’m talking primarily about the US dollar. This also includes bonds, US Treasury Bills, gold and silver. All of these tend to go up leading up to a bear market or economic recession, and stay high until investors are confident a real recovery is beginning.
You can do complex methods like shorting stocks and trading options contracts. Unless you know how to do this well, I would stay out until you were more seasoned as an investor and trader. You can go to stock market for beginners for some tips on those who are starting out in this business.
Here is the tricky thing about the current downturn. We’re not sure if the bottom has really hit and if there is a recovery really on it’s way. The stimulus money that was injected into the economy is wearing off and we’re not really that sure if it has brought a sustained recovery.
There might be something called a double dip recession. That means after the stimulus wears off, you get a second recession. Job numbers are still low, unemployment is still high and retail sales are stagnant. Those are signs that the recovery may still be a ways away.
From time to time, I allow my reader’s to make guest posts. This is one of them.
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