All of a sudden the media has started talking about a double dip recession around the corner as well as a massive stock decline that is going to happen soon. The shift has been surprising. Just a few months back, all analysts were talking about recovery and expansion as if the recessionary clouds were finally lifting.
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Now, this is the time time to recession proof your stock portfolio. Look for those sectors of the economy that get least hit by the recession. One good advice is to go for dividend paying stocks. The reason is simple, dividend paying stocks tend to hold better than non dividend paying stocks. Biggest dividend paying companies are the ones that tend to provide products that people buy even during times of recession for example pharmaceuticals, electricity, food, health etc.
Sandard & Poor’s data shows that the following sectors outperformed the market even during times of recession;
Alcoholic Beverage consumption is recession free. Investing in Alcoholic Beverage Companies can be good option during times of recession. Studies have shown that Alcoholic Beverage Makers survive the recession very well and their stocks in the past rose by 8% during hard times .
Household Products keep on selling during hard times. Studies have shown that Household Product Manufacturers do well during recession and their stocks showed a gain of 1.8% in the past during recessions .
Tobacco smoking is not affected by recession or hard times. Studies have shown that Tobacco Companies in the past recessions posted a gain of 9.6% .
These are just a few recession proof sectors of the economy that do not get hit by the economic slowdown. The point is that during times of recession, you don’t need to abandon the stock market. Now, if you are a day trader or a momentum trader than you don’t need to worry whether the market is going up or down.
You can also use options strategies to profit from the market no matter what it does goes up or down. So, there are many sectors of the economy that traditionally perform well during the times of recession. You can invest in them. You can change your investment style a little bit and try momentum investing. You can invest in options. There are many ways you can still profit from the recession !