Is it possible to earn a profit in the securities markets during a recession or other tough economic situation? The short answer is yes. The longer version is that you need to know some specific techniques to do well in bad times. The COVID pandemic has slowed the global economy way down, to the point of recession in many places. While a few sectors have started to bounce back, a quick recovery is in doubt with the recent resurgence of the virus.
What’s an investor to do? First, realize that recessions don’t necessarily mean every aspect of the economy is in bad shape. Second, things won’t always be like this. Third, there are some tried and true techniques for turning a profit any time of the year, in any kind of financial environment. Here are some of the most effective strategies for prospering during a market slump.
Find Healthy Sectors
No matter what triggers a recession or slowdown, there are always at least a couple of market segments that thrive. For example, in the current virus-induced recession, healthcare and online retailers have been enjoying some of their best months ever. That only makes sense with the rush for medicines, disinfectants, vitamins, and delivered goods. So, if you ever find yourself with a portfolio full of stocks amid an economic downturn, consider checking out who the current winners are. It’ll be different each time, depending on what caused the slump.
Hunt for Dividends
A simple way to earn a return in any situation is to seek dividend paying stocks. You can find lists online and then screen them down from there for other characteristics, like stability, product line, etc. In fact, buying shares that pay dividends is a popular technique among beginning traders. Check company details to see exactly what their dividend policy is. Then, when you begin online stock trading, you can focus on that group of companies and add them to your portfolio for long-term holds.
Online trading is endlessly versatile because people can choose any sector, timeframe, or investment type they prefer. Once you get set up with a broker and platform, choose from stocks, bonds, commodities, precious metals, ETFs (exchange-traded funds), index funds, and more. The beauty of operating this way is that you never have to leave the comfort of your computer chair unless you want to engage in remote trading from your phone or other devices.
Check Out the Metals
Precious metals often do well in challenging times. Investors view them as a safe haven of guaranteed value. In fact, you can check out the price charts for gold and silver over the last 50 years and see how both metals rose in price during recessionary periods.
Take the Long View
A little bit of positive thinking goes a long way. Consider the fact that no recessionary cycle has lasted forever. In fact, most don’t last for more than a few years. What’s that mean for you, the trader-investor? It means you can simply ride it out, and continue investing as you always have. But, in order for this tactic to work, you can’t be a short-term, swing, or day trader. You have to take the long view and be willing to hang on to your assets until things get better.