Investment Ideas For the Recession

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There's an old Wall Street adage that says 'Buy on bad news and sell on good news'. For people with secure jobs and ample savings, the current economic downturn may well turn out to be a golden opportunity. This is the perfect time to buy a new house or a car or that stock you have been planning to purchase for a while. You will find that people are actually eager to do business with you and you can snap up a few bargains on the go. The icing on the cake is that if you have a good credit history, this is also a great time to borrow. Interest rates are at the lowest and they might still go lower if the Fed continues to cut rates.

Painful as the recession is, it opens up some wonderful opportunities to the right investor. Here are some great investment ideas to take advantage of the recession-

1. Invest in a house
From 2000 to 2006 the value of the houses were steadily going up and a lot of builders had started building projects, but by the time their projects were finished we were suddenly in a recession. The fear that this is going to be a long recession has led many people to put off their purchases, especially something as important as buying a house. The increasing level of unemployment and layoffs has also forced many homeowners to sell their homes and move to another location where they are offered a job. All of this has resulted in situation where there are a lot of homes for sale, for which there are few buyers. So prices are falling and the sellers are forced to offer more attractive prices.

In addition to the falling prices, you may be pleasantly surprised to find that with demand going down, you suddenly have the power to dictate the terms of the deal. Your real estate agent may be willing to cut her commission or the seller may agree to make some modifications in the house at his own expense.

Due to the sub-prime crisis lenders may have tightened their norms, but for people with good credit history it is still easy to get a loan. With lower mortgage rates and better pricing, this is the perfect time to purchase your dream house.

2. Invest in a car
The U.S. car and light truck sales in 2007 marked the worst sales year in a decade. With oil prices at an all-time high and a bleak outlook on the job market, most Americans are putting off automobile purchases. Worried about the dip in the sales, auto makers are cutting into their profit and have started offering rebates and other deals.

There are also a lot of used vehicles for sale in the market. If you are worried about the depreciation of a new car, it might actually be a good idea to buy a used car. Demand for used cars is also waning due to the overall low demand and you may be able to get some very good deals in this buyers market.

3. Invest in stocks
With bad news after bad news, it might seem that the bad times will continue forever, but every recession has an end and better times will eventually return to the economy. Wise investors can actually use these bear markets to pick up high-quality companies that are selling for cheap. As a matter of fact, the stocks in the S.& P. 500 are now worth about half of what they were at their peak.

If you are worried that the recession is going to last for a while (the great depression lasted 10 years; but normally recessions last for one to two years at the most), then you can start a systematic investment plan, which will allow you to invest small amounts of money every month. A systematic investment plan is great because it allows dollar-cost averaging, or the ability to distribute the cost of purchase over a period of time.

Of course, it goes without saying that in tough times like these you must exercise due diligence. If you are fearful of loosing your job or does not have an emergency fund, then this is not the time to go buying that fancy car or a summer house. At the same time if you are financially sound or have been putting off that purchase just because you could not get the right price, then this is the perfect time to splurge!