Recessions can be a difficult time for investors, as stock prices tend to plummet and markets become volatile. The S&P 500 has dropped by almost 24% this year, and the consensus is that a recession is coming. To protect their investments, many investors turn to fixed-income investments or dividend-producing investments during recessions. However, there are other options available, such as exchange-traded funds and low-cost index funds.
It is also important to consider companies that sell items that everyone else purchases, regardless of external circumstances. Short selling can be risky, as losses are theoretically unlimited, so it is important to be aware of the risks involved. Finally, investors should look for dividend-paying stocks or ETFs that offer higher returns without additional risk. Since 1950, the average drop of the S&P 500 during a recession has been around 29%. This means that the market is discounting a slight stock recession.
Investors react quickly to any sign of news, good or bad, and fleeing to safety may cause some investors to take their money out of the stock market entirely. A sharp decline in the stock market is usually an indicator of an impending recession. Calculated based on the average performance of all stock recommendations since the creation of the Stock Advisor service in February 2002, one of the best places to start when looking for companies is to use a free stock evaluator. The only downside of the Price fund is that its portfolio is full of stocks whose dividends may be growing but are small, including Apple (AAPL (opens in a new tab)), with a yield of 0.6%.
Investing in funds such as exchange-traded funds and low-cost index funds is generally less risky than investing in individual stocks, which could be especially attractive during a recession. A year after the recession, stocks were undervalued by approximately 33%, laying the foundation for the longest economic expansion and bull market in the United States. But bear markets and recessions may be the time to reevaluate and consider companies that sell items than everyone else purchase, regardless of external circumstances. Recession alarms have been ringing lately due to a sharp rise in inflation and interest rates, and an equally sharp decline in the stock market. But instead of living at the whim of the stock market, consider diversifying into other assets such as treasury securities, money market funds, and certificates of deposit (CDs). The unemployment rate was set at 3.75% in August, the highest in six months, but it is still the tightest labor market in modern times. When looking for dividend-paying stocks or dividend-paying ETFs, it's important to keep in mind that performance shouldn't be the main determining factor, as higher returns tend to carry additional risk.
If you're worried about a deep and protracted recession, consider stocks like Merck (MRK (opens in new tab)), the pharmaceutical giant. These funds emerged from the Great Recession bear market with a fall of 29% and 27%, respectively, while the S&P 500 continued to fall by more than 50%.