chances of making money in a recession?

Question

what is the likeliness and what strategies do people use during this time?

Answer 1

First, you need to protect the money that you have. This means taking any money you have invested in assets which are at risk of losing value (stocks) and investing in assets which have a lower risk of losing value (cash, bonds). You do not need to move all of it, but whatever you need to ensure a proper allocation of assets.

If you have a view of how long you expect the ressession to go on for, lock in your money in high yielding CDs, bonds, etc. This way you will keep on making money as interest rates fall (The Fed decreases rates to increase spending-they make it cheaper to borrow). You can even "ladder" your investments by investing in different maturities - 1yr, 2yr, 5yr.

Second, look at alternative investments such as property, options, shorting stocks, etc. These strategies will earn you money depending on how much work you put into it. There is no free lunch, but there is money that can be made.

Answer 2

Recessions require different investment strategies than expansions. In a recession you need to protect your wealth, so you should sell stocks that are usually hurt by recessions (metals, mining, industrial companies) and either put it into something with a fixed interest rate like a CD or put that money into stocks that are not hurt by recessions such as food or drug stocks. These stocks are considered defensive stocks in recessions because even if the economy is doing poorly, people will still eat and take their medicine so the earnings of these companies won't be hurt as badly as the earnings of the "smokestack" companies. Then if you want to profit off of a downturn in the stock market, there are two main strategies. The first is short selling. As opposed to going long where you buy a stock and hope to later sell it at a higher price, going short involves borrowing a stock and selling it hoping to buy it back at a lower price. It is important to remember that dangers of shorting, though. History shows us that the stock market has a general upward trend so by shorting you are betting against this well-established trend. Also, shorting has a limited upside (the best you could do is to have the stock go to zero) but it has a theoretically unlimited downside (in theory, there is no limit to how high a stock price can go) so shorting is considered to be riskier than going long. Another way to profit off a downturn in the stock market is buying put options. Options are contracts that give you the right to buy or sell stock at a certain price. To profit off a recession you would want to buy put options which are bets that a stock will go down. The way a put option works is the option buyer buys the option with a certain strike price and hopes that the stock goes below that price by a certain date. If it does, he or she can buy the stock at its current price and sell it at its strike price. That is called exercising the option. You could also close out the position if it increases in value and just sell the option and take the profits. Furthermore, if the stock price fails to go below the stirke price, then the option is worthless and you lose your entire initial investment. An appeal of options though is that you pay for it all upfront for a relatively small amount of money given the huge potential gains you could make (the potential gains of options are much greater than of normal stock trading). Options are pretty complicated. I hope I helped, and if you want to read more about options I would recommend going to www.investopedia.com and reading their tutorials; they have one on options.

Answer 3

Buy! If you still have money, and if you can wait it out, buying during the recession will always be a good strategy. There is always a recovery after every recession.

Answer 4

Property and good stocks that fell out of favor are good ways to make money. When a resession hits, the banks lower interest rates to make borrowing easier, which gets people to buy property then you flip the propery because property booms are quick things.

Answer 5

Have a product people actually need, like soap, milk, eggs, gasoline. Do more than the competition, whatever they might be.

What gets hurt in a recession are things people don't need, or can do for themselves, like carwashes, or things people can put off till times are better, like silk ties.

Answer 6

the best way to make money in a down market is to short sell (unlimited loss potential)
You could also invest in precious metals a hedge against the markets

Answer 7

Check what was hot when we were in our last recession. Chances are that may spring up some ideas for you.

Answer 8

buy houses after they are repossessed remember one persons misfortune is another persons opertunity.

Answer 9

Try investing in real estate.

Answer 10

I made mine by working.