Tag Archives: Recession

Investment strategies during recession

There are two ways of looking at the global recession: the usual pessimistic view and the rare optimistic outlook.  While most people fear a recession, there are still ways of making money during a downtrend. The economic effects of the recession should not stand in the way of your investment goals. In fact, the hard times should give you a better reason to pull your finances together.  Here’s how:

Start a reserve fund.  If you are employed, the risk of losing your job in a lay-off increases.  Prepare for such an event by setting aside some cash as your emergency fund.  Aim at building the equivalent of the value of at least six months’ worth of living expenses.  You should be able to keep this in a regular savings account and not in a time deposit because the latter locks in your emergency funds to a maturity date and may make your money inaccessible when you need it.

Invest in stocks. If you have money to spare, a recession is said to be the best time to find good investment opportunities when most stock prices are at their lowest.  During a recession, think like a long term investor and buy stocks when their prices fall.  Economies go through cycles and it will only be a matter of time when the downtrend will experience a reversal.  When the tides will have turned, you can be in for a windfall as your recession purchases could be worth much more by that time. 

Invest in utility stocks.  Companies in the utilities industry are safer bets for stock investments.  Traditionally, the utilities companies manage to stay afloat during a recession because their services are indispensable to almost everyone’s daily life.  Hard times or not, people will need energy, for example, for their daily needs.  Utility companies are also known to consistently pay out annual dividends.  While these annual dividends may not amount to much, any income stream that is available to you should be welcome during hard times. 

Real estate investments.  Prices of real estate can also drop during a recession.  Nowadays, it can be said that the real estate industry is a buyer’s market. In other words, you can expect to dictate the price at which to buy property.  Most sellers are interested in getting rid of property for a variety of personal reasons and may just take your low offer simply to get their hands on much needed cash.  Not all real estate purchases make good investments.  You should look at real estate in good locations where there is still a demand for rental properties.  During a recession, your strategy should be to generate cash flow from your real estate investment, rather than to seek an appreciation in its value. 

Most people avoid investing during a recession because of fear about how their investments may pan out.  You should be able to overcome the same fears by adopting any or all of the investment strategies mentioned.


How to Tell if the Economy is Recovering — or NOT

Interesting signs of the times are not always those observed and analyzed by economic observers.  Lipstick, men’s underwear, moviegoing habits and other ordinary activities provide a refreshing view of the state of the economy.  Check this link out for more details.

1.  Men’s underwear:  A dip in the sales of this item is a sign that men are feeling the pinch. This report cites Alan Greenspan’s book “The Age of Turbulence” where he says that men tend not to replace their underpants when they feel trouble looming. 

2. Lipstick index: Immediately after the 9/11 attacks in the US, Estee Lauder chairman studied sales of their lipstick products and discovered that women were buying more lipstick than usual, bolstering the psychological view that women put on lipstick to feel good about themselves.   They went further to speculate that in times of economic recession, women will turn to inexpensive options for feeling good, lipstick being one of them.

3.  Foundation index: Closely related to the lipstick index is the use of foundation to get flawless looking skin, in lieu of expensive facial treatments and trips to the salon that women tend to forego during a recession.  Similar observations were made on sales of DIY hair dye home treatments.

4.  Hot Waitress Index:  New York Magazine contributed this piece of indicator– that in times of recession, waitresses appear to be hotter, possibly owing to the slump in the job market and oversupply of workers.

Read more for other interesting observations.