How to Invest in Stocks During a Recession

By Johnny Kampis

  • Overview

    It is tough for any investor to watch the stock market plunge during a recession, but a bear market also provides interesting investment opportunities. The key during a market downturn is to stay the course, and even to buy more stock, depending on your positions and money availability. Form a plan and stick to it.
    • Step 1

      Hold the stocks you own, generally. Unless you have reason to believe that your stock will continue to free-fall you should ride out the storm and wait for the stock price to rebound. Otherwise, you may sell your stock during a big dip in price only to see it rise much higher later.
    • Step 2

      Buy more stock. A recession is often the time that many stocks are at their lowest points, so it is often prudent to begin investing when everyone else is selling off their stocks.

    • Step 3

      Invest in the stock of companies that tend to do well during a recession. For example, McDonald's is likely to sell even more of its cheap hamburgers if people have less money to spend on fine dining. Think about the habits of people during down times and invest in the companies that are likely to benefit.
    • Step 4

      Consider investing in bonds. These are usually a safer bet than stocks, as they are less volatile. Bonds often return less than stocks during a bull market but perform better during a bear market.
    • Skill: Easy
    • Warning:
    • Don't panic. Following the crowd during a recession and selling off your stock will only compound your losses.

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