Due to the COVID-19 pandemic, almost every market is under recession and this is continuing day by day since there are strong signs of a massive stock decline that is happening right now. 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.

So why everyone is now talking about the double-dip recession and the massive stock decline that is going to happen soon? There are many indicators that are pointing towards that direction. The indicators are obvious, global shipping is grinding down to a halt, consumers are losing confidence, manufacturing is slowing down and even China’s super hot economy is now showing signs of slowing down.

There are many other indicators that are pointing towards the recession becoming double-dip soon and the stock market again becoming bearish. If you have been following the DOW, it has made huge swings of 1,000’s of points in the last few weeks.

These are times when one needs to look at investing in sectors that do not get hit by recession so bad. An example of these sectors includes the stocks that are dividend-paying. One thing you need to know about dividend-paying stocks is that the companies associated with them deal with certain items that people will have to buy even during hard times. Some of these kinds of products include pharmaceuticals, electricity, food, health, etc.
Standard & Poor’s data shows that the following sectors outperformed the market even during times of recession;
Alcoholic Beverage Makers not only survive the recession better 80% of the time but data shows that these stocks rose by about 8% during those recessionary times.
Household Product Manufacturers also do better during times of recession and posted a gain of 1.8% during the previous recession.
Tobacco Companies posted a gain of 9.6% and beat the market almost every time.

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 profit both ways. If you have been a traditional buy and hold investor than you should think about changing your investment style. What you need to do is to become a short term investor who looks to profit from the volatility in the market. There is an investor who was able to turn his $10,000 into almost $42 Million in just under two years using momentum trading strategies when everyone was crying about the stock market crash.

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 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!

There are also some valid ways that you can recession-proof your stock market investments. this can be helpful because one can realize profits even during the hard times. It requires one to be aware of the market trends and make smart investment moves in order to survive a recession. Being aware of your investment environment is a huge step in gaining some income during a recession.

The stock market is one place where millions are lost in a day and millions are gained in a day. You need to be very careful when you are investing in the stock market as the tendency to go the full steam and invest all your money in the booming market is always there when the market is going up. This can be your nemesis too because of the fact that all your eggs are in one basket.

Well you can change that if you follow a few basic principles. There are a couple of investment decisions that you need to make so that you have a portfolio that is absolutely recession-proof.

The number one point in that is to make sure that you have stocks that are pure defensive plays. These kinds of stocks normally involve consumer goods that are fast-moving or the education sector will not boom when the market is on its peak and also won’t fall as much either. For this reason, these kinds of stocks will tend to act in this manner due to the fact that some products such as detergents, shampoo, toothpaste are all required on a daily basis. Their consumption is not affected by the recession.
The same holds true for the education sector. Recession or no recession people will continue to study and take exams. That said there are several other sectors that can fit this bill and you will have to find out stocks that are recession-proof.

The other major thing that you need to do is always given a cash component in your portfolio. That cash component will help you avoid losing money in the event of a stock market crash.

For building recession-proof portfolios of stocks always pick stocks that are undervalued. That way even if the stock market crash happens these stocks will not lose much money.

Asset allocation across various sectors of stocks is a must if you want to build a good portfolio. The number of stocks in your portfolio should not be more than 15. In case you want to play in the market for short term as well as long term then you should build two separate portfolios. A lot of people start mixing these two kinds of portfolios and then end up losing sight of that actual goals.

Last but not the least keep a profit gain target in mind and once you make the desired money you exit the stock no matter how much potential that stock has in the future.