3 Ideas for Investing in a Down Market (Part 1)

Right now, there is little question that we are in an economic slowdown. In general, our volatile stock market is down. But that doesn’t mean that now is the time to panic and withdraw everything from investment accounts or cash in your 401(k). The most important thing you can do is to not panic. Realize that, over time, the stock market generally gains. If you can ride out the storm, you will be rewarded.

But these times do call for prudence. There are some things that you can do now to protect your investment portfolio at this time, and prepare for the stock market recovery. This is the first part of a three-part series on ideas for investing in a down market. Today we will look at the importance of choosing companies that are fundamentally sound.

Value stocks

Companies that have solid, underlying financial and management practices are often known as “fundamentally sound.” These are usually companies that are considered “value” stocks. They are venerable companies, like Coca-Cola (KO) or Exxon Mobil (XOM), that regularly make solid returns. They may not be huge gains, but they are usually companies that have been around for a while and that make solid business decisions.

Investing in these companies in a down market means that you can get more shares for your money. And, because they practice good financial sense, they are more likely to survive the downturn intact. Then, when the market recovers, you are more likely to have larger returns, since you will own more shares.

** Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment carries the risk of loss.

This is the first in a three-part series for Talk Stock Trading by guest Miranda Marquit. Miranda writes for Yielding Wealth and for the Banks.com Money & Investing blog.