How To Invest During Economic Downturn

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There’s no such thing as a “recession-proof” investment, but some types of investments could help your portfolio better overcome economic downturn.

The threat of a recession is real, and many consider it inevitable. With stocks falling into a bear market due to fears that aggressive rate hikes from the Federal Reserve and a sharp rise in inflation will plunge the economy into a looming recession, many are wondering: Should you invest during a recession? And what to invest in during economic difficulty?

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While investing in a recession can be stressful, it doesn’t have to be intimidating — if you know what to look for.

Investing During An Economic Downturn

Scott Sheridan, market expert, and CEO of tastyworks comments:

"I think trying to time markets is very difficult. And while I understand worries about being exposed to a potential recession and market pullback, it’s very hard once you’re not invested to get back in. Instead, I think it makes more sense to just be mechanical and then adjust exposure based on market conditions, but always maintaining some exposure.

For longer term holders of stock, we’ve seen a lot of stocks come down substantially in price. If you’ve been waiting for a chance to get long, this could be the time to dip a toe in the water. You don’t have to put on a full position. You can put on a smaller amount and if we pull back more, add to it. If we rally and you don’t want to add more on the way up, at least you’re participating.

Traders who sell options can try capitalizing on increased levels of volatility in the market. When volatility increases, like it’s been doing much of this year, option premium becomes what we call, rich. That doesn’t mean the probabilities of being profitable increase; however, it does mean you’re collecting more premium on your trades.

Again, no matter your investing style, I think there are a lot of opportunities at the moment. That doesn’t mean you have to dive in head first. It just means there’s an opportunity for those willing to take some risk"

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About tastyworks

tastyworks is an online brokerage platform built specifically for options traders. The up-and-coming online broker is a subsidiary of tastytrade, one of the fastest growing online financial networks in the world. tastyworks was designed by the founders of thinkorswim with sophisticated functionality for complicated options trades and strategies in mind. It has a do-it-yourself approach and provides the technology, education, and support to succeed more easily on your own.