How to Select Stocks in a Recession

A recession and down market is the best time to invest in stocks. Stocks are at bargain basement prices so you can buy them, hold on a bit and profit big time.

Difficulty: Easy

Instructions

1. The first thing to do is to go to an financial tool such as Scott Trade and do a stock screener. There are so many stocks out there it is impossible to research every one of them. Screen them by selecting 2-3 industries that you are familiar with and like. The more you know about the company the better you position to choose one that will weather the storm.

2. Next go to Google finance or another finance planner and look at the assets and debt. You want to make sure that your company has enough assets to cover its debt. Some industries naturally have a higher or lower assets to debt ratio, but you want one with a low ratio for its industry. These are the companies that will be in the best position to stay storm and weather the storm. Find 10 or so with the highest ratios.

3. Now look at the percent growth over the last 10 years. A strong company will have a percent growth that increases steadily each year. You want the company that is poised to be the last one standing. Find the 5 or so with the best increase in percent growth.

4. Now look through the internet for new innovations and other things that make you feel that the stock is strong and will continue to be strong. If you are investing in pharmaceuticals this will be new drugs...

5. Last but not least be patient. Look for 2 to 3 days in a row that the stock (S&P500) goes down. Buy at this time. This will maximize your chance of getting the best price.

Tips & Warnings

• Be strong. It is easy to keep holding onto a stock hoping it will go higher, but realize that this is dangerous. Stocks can go down just as quickly as they go up.
• Choose the percent profit you want to make and stick to it. It may mean you miss out on some great profits, but it will likely save you from a crash. Think about the dotcom guys who kept holding out and their stocks went from a million profit to a big loss. Do not get greedy.
• Once you sell a stock wipe your hands clean. Do not second guess yourself. You made the best decision you could at the time.
• Realize that stocks are a gamble you may win or loose.

[sneedc]

on 1/7/2009 So true, now IS the time to jump on those stocks that are at an all time low! thanks, great tips!

[didimay]

on 12/16/2008 The stock market facinates me. Thanks