Stock Market Investments During the Recession

As businesses begin to lose money and booming, raging profits give way to something a little more on par with their daily expenses the door to successfully investing in the market swings wide open and invites you in. The principles of investing in the stock market during a recession are remarkably similar to the principles of investing in real estate. When you invest in the stock market during a recession you have the opportunity to take advantage of a company’s poor fortune.

How? When companies are making money hand over fist the value of the company goes through the roof, and as the value of the company rises so too does the value of its stock. So when a company is riding high the price of the stock is going to be high as well. Shift the situation a bit, however, and the story changes.

Take mortgage giant Fannie Mae. In the month of July 2008 alone the value of its stock fell from $16 and change to a little over $8 a share. By September of that same year the share price was under a dollar courtesy of the sheer quantity of its borrowers that had defaulted on their loans.

Fannie Mae is only one of many companies who suffered a similar fate during the last recession. It’s situations like these that present stock holders willing to think in the long term with a golden opportunity to make a profit. If they can purchase the shares when they are low, as in Fannie Mae’s case, less than 1/16 their value, they can sit back, fold their hands and wait for the recession to end. When the recession has ended they can sell their shares for a tidy profit, sit back and pat themselves on the back for a job well done.