5 Useful Investment Strategies During a Recession
U-shaped, V-shaped or temporarily L-shaped; one thing’s for certain, turbulent times don’t last forever. That’s why, when a recession rolls around, I’m a dyed-in-the-wool believer in using all the investment skills at my disposal to take advantage of economic downturns and make long-term trades and investments. There are some seriously big returns to be made if you know where to look.
Want to learn my top trading strategies for a recession? Register for my free Trade the Turmoil market training. Start protecting your portfolio and learn how to take advantage of this unique opportunity. You can also read on for five tips for trading during a recession, including what to consider investing in.
Investment Strategy #1: High demand, core sector stocks
While it can be tempting to steer clear of equities during a recession, they can still offer incredible value. As most of the economy navigates its way through the turbulence, a handful of sectors tend to thrive. These can potentially deliver strong gains.
In the face of the COVID-19 pandemic, industries such as healthcare, pharmaceuticals and grocery stores are experiencing an unprecedented boom. Regardless of the state of the economy, people still need these items. This makes core sector stocks a clever trading strategy during a recession. In fact, technology stocks like Apple, Google, Microsoft and Amazon have all thrived during the COVID-19 pandemic and will be winners long after it has passed.
Investment Strategy #2: Quality, not quantity
Decades of experience have taught me that a ‘quality over quantity’ approach to trading is one of the best investment strategies around. Investing and trading in high quality, top performing companies with minimal debt, strong balance sheets and healthy cash flows is a reliable way to unlock ROI.
Recessions mean shares in these sorts of companies inevitably fall. This can open doors for investors who know what to look for. Once the economy begins to recover, you’re in a good position to start earning.
Investment Strategy #3: Reliable dividend stocks
Dividend stocks are great if you’re looking for reliable passive income that holds its long-term value. Again, sound balance sheets and small debt-to-equity (D/E) ratios are good prerequisites to identify. If you’re looking for a lower risk investment, consider Dividend Aristocrats. These are top performing S&P 500 index companies with a 25-year or more track record of increasing dividend payouts.
Investment Strategy #4: Real estate
Economists are predicting the Australian real estate market could crash by up to 30 percent in a worst case scenario. While this could prove disastrous for some, it could usher in a unique opportunity for investors.
The price reduction may take a few quarters to kick in. That’s why now is a good time to consider plotting your next move. This means saving for a deposit, seeking mortgage approval and reading up on areas with high ROI. When house prices drop, you’ll be ready to pounce.
Investment Strategy #5: Invest in your knowledge and skills
This lull in work and social life triggered by the COVID-19 pandemic is a great opportunity to invest in yourself. I’ve always believed knowledge is power. The savvier you get, the probability is you will make better trading and investing decisions.
Even without a recession, one of the best investment strategies is to invest in building your skillset. That’s why I’ve developed empowering courses like Trade the Turmoil. It’s a market crisis workshop designed to help you protect your portfolio, safeguard your assets and take advantage of a potential once-in-a-lifetime recession opportunity.