Investing During a Recession

Those who work hard for their money want their money to work just as hard for them. If you are ready to take the plunge and build up your investment portfolio, investing during a recession can prove to be a valuable strategy for you. According to the number-crunching conducted by Morningstar analyst Bill Bergman, historical data from the last nine recessions proved that investing normally during a recession was better than traditional investment strategies.

Value Stocks

Investors may be hesitant to put more money into uncertain investments as economic downturns can certainly take away large amounts of gains. However, the recession has forced the price of many excellent stocks to be lowered and become financially obtainable for many investors. There is no better time to purchase a “brand name” stock than when the price has adjusted lower due to circumstances beyond the company’s control.

Bond Purchases

Another place to consider investing during a recession is the bond market as according to Martin Fridson, Merrill Lynch’s chief high-yield strategist, “Interest rates start to come down during a recession, and all bond [prices] tend to benefit from that.” Some planners are even suggesting switching the allocation for bond investments to a hefty 20% or your portfolio value as they are considered to be attractive investment vehicles now. The types of bonds you should pursue depends on how much available money you have allocated towards investing and your risk tolerance levels.

Investors would also be wise to keep some cash stored safely in a money market fund as it is a liquid account and can be easily accessed. Although you would not make a huge profit off the investment, you could pace the average rate of inflation and keep your money’s face value.