Things You'll Need:
- A willingness to improve your financial future.
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Step 1
Buying stocks in a down market provides an excellent opportunity to grow your investment, as the company's stock price is naturally pulled down with a slumping market. In other words, the value of the company - its ability to turn a profit -- hasn't really changed, but the stock is now offered at a steep discount because of market conditions. The best way to acquire stock in a down economy is to cost-average your purchases by investing at fixed intervals, ensuring that you buy more shares when the price goes down, and less shares when the price rises. This keeps your cost per share down, and maximizes long-term gains. Stock is a risky investment, but historically provides excellent returns. However, your money will be tied up indefinitely while you wait for the market to recover, so you should definitely add some short and mid-term investments into your portfolio as well.
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Step 2
The traditional short-term investments are bonds and certificates of deposit (CDs). Bonds and CDs ultimately function the same way: you pay a certain amount now, and receive that money plus interest later. They are both offered with a variety of maturity dates, so you can decide exactly how long you want to tie up your money, and at what rate of interest. The rates of bonds and CDs fluctuate independent of each other, so go with the one that gives better terms. If you don't want to hassle with maturity dates, you can use a money market account instead. This is basically a fund that buys bonds and CD; you can withdraw your money any time, and you won't have to hassle with continually purchasing bonds and CDs yourself, but you earn comparable returns none the less.
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Step 3
Paying down debt, a short-term investment often forgotten, can sometimes outperform CDs or bonds in a down market. Whether you have student loans, home equity loans, mortgage loans, high-interest credit cards or automobile loans, business loans, or any other kind of debt, the gap between the interest you pay and the interest you could earn on short-term investments widens. This means that if you have a 9% home equity loan, and you could get a CD for 3%, paying extra on your loan is three times better. However, while this is an excellent fixed investment, is not liquid at all - the 9% return is amortized over the life of the loan, as money that you save by not paying interest. Still, if you have 8 years left on a fixed equity loan, you could essentially purchase an 8-year CD at 9% interest rate. This can be a great investment, but of course taxes will factor heavily into this as well, so consider your options carefully. Paying down interest can work very well with credit cards and automobile loans, or anything that matures within a couple years; however, before paying off debts, always compare the return with what you could be earning elsewhere.
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Step 4
Peer-to-peer lending, a relatively new investment vehicle on the market, boasts impressive returns with minimal risk due to its heavy diversification. Peer-to-peer lending works like this: a borrower makes a request for a loan, and many lenders pool their money together to fund the loan. By investing only a small amount into each individual loan, the investor diversifies risk across many loans, guaranteeing that a single default does not cripple the portfolio. These are high-risk loans, and there will be defaults, but the returns are still excellent overall. You can select from pre-determined plans that average 6% to 15%+ (based on risk), or browse loans and pick your own portfolio on a case-by-case basis. Most loans mature in 3 years, but can be paid off early as well; as you invest in many micro-loans, you earn a constant supply of interest payments and payoffs from your portfolio. You can re-invest profits and automatically buy new loans with the proceeds, or take the proceeds as short-term income. However, as you can earn 10-15% interest with relatively little risk, and the cash flow is constant, re-investment of your profits means your portfolio with burst with exponential growth.
