How does a consumer/individual prepare for a recession?

[PauletteGoddard]

My question is especially targeted to people who keenly remember surviving the last one.

In case the counterquestion: "how long a recession are we talking about?" is raised, let's say 18-36 months.

[LuxLiving]

At the time I felt the last recessive wave coming on I didn't have a lot of extra to invest wisely in a stock, precious metals or mutual fund and also eat, so I decided to 'go long' on the food essentials at my home.

Which for my family meant I stocked up on peanut butter, jelly, tuna, other canned meats, rice, beans, pasta, coffee and sugar, shampoo, toilet paper & soap. Think of the things you think you'd miss if the prices got excessive or if supply was unavailable and stock up on it and then put it into the food rotation so as to not allow spoilage and keep a satisfying level of the items on hand at all times. Only you will know what that satisfied level is.

Laugh if you will, but foodstuffs that won't spoil is a decent investment in feelings of security. I get rather Scarlett O'Hara-ish and think, "I'll never go hungry, no, nor any of mine."

[Scanner]

Well, I think you have to mimic what good companies do - they sit on a certain amount of cash at all times, to weather the bad times.

I think from a small investor standpoint, you have made a case for "income investing" vs. "growth investing" by raising this question. I think pretty much, growth oriented strategy (buy, hold, and hope it soars) has ruled the mindset of American investors.

But our grandfathers/grandmothers used to invest for income - dividend stocks mainly. So. . .you can picture. . .let's say you are laid off from your job for 1 year. . .but you have $1500/month coming in dividend checks. . .it takes the edge off.

However, it does beg the question - if the economy is in a recession. . .those dividend checks won't be as big, will they?

I have thought about this issue a bit - way before the impending recession.

I have re-thunk my career in terms of a "portfolio" that needs to be diversified. That's why I have a rad. tech. certification as well as a chiropractic degree (and that took some investment of time/money and some ingenuity).

When one field is doing well. . .I ramp down on the hours of the other. . .when vice versa happens. . .I ramp up. Sometimes. . .as per the market. . .both can be down. Both have their advantages and disadvantages.

Ideally, I should probably diversfy across industries - not just healthcare. But. . .technology could hire me when health care is doing bad.

I recommend doing that - diversifying your career - don't have all of your career eggs in one basket and you don't worry about recessions as much.

Whether it's education, technology, industry, healthcare, hospitality. . .I don't think it's good to just be in one sector anymore.

Just a theory I've been floating.

[jIM_Ohio]

Are you trying to get thru a recession or profit from it?


To get through it:
My suggestion would be to open lines of credit prior to recession
Invest for income (bonds, dividends, cash)
Have cash set aside (6 mos income, suggested)

To profit from it:
Buy on dips. If you have 6mos income (in EF), create "12 positions" (half of each mos expenses). After a month, go in 1/12. Next month, go in 1/12. Goal is to buy low. I'd buy small caps and bonds (small caps tend to lead way out of recessions, bonds increase in value as interest rates drop).

Obviously if recession lasts longer than 12 months... watch cashing out all off emergency fund. I'd keep 3 mos expenses (so go long on only 6/12 of cash reserves with investments).

You don't know you are in a recession until you are almost out of one... meaning economists won't use the "r" word in fears of spooking panic until it's obvious we are in... which means you might miss the early buying points.


If things get really bad, then use the last 3 months cash on guns and ammunition. Self defense if it's real anarchy is my plan...

recession will probably end with low interest rates. So bonds will increase, and any credit one taps into should be refinanced to a lower rate.

My thoughts anyway.

I think the market is going through a small correction... my company (software) is having record profits and record growth... so I don't see a full blown 1991 recession again. 91 was bad, though... so I might think anything we see should be mild in comparison.

[PauletteGoddard]

When one field is doing well. . .I ramp down on the hours of the other. . .when vice versa happens. . .I ramp up. Sometimes. . .as per the market. . .both can be down. Both have their advantages and disadvantages

This sounds smart. I'd like to do bookkeeping for small companies or learn plumbing. Something that benefits my local community, enhances my local networks and can't be outsourced to Mumbai.

[sweeps]

Timely topic...
Dow drops 180 on fear of correction

[Ima saver]

It is down 400 right now at quarter to 4 pm.

I personally like to have a lot of cash in a money market earning over 5% interest.