Making the Right Investment Choices in Difficult Times

When times are tough, investing is the last thing on many people's minds. Economic problems rarely leave the stock market unscathed, so long-time investors often proceed with great caution or even hang it up until things are looking better. As for newbie investors, a suffering economy can scare them away from stocks, bonds and other investments altogether.

However, it's crucial to realize that bad economic times will not last forever. The economy has always had its ups and downs, and this time is no different. As a matter of fact, an economic downturn is one of the best times to buy stocks, because their prices are much lower than normal. You won't be able to turn around and sell them for a profit right away, but long-term investing is a much sounder strategy anyway.

Still, it can be difficult to determine which investments are the best ones to make during difficult economic times. Here are a few tips that might help.

* Avoid buying up every stock that experiences a significant drop in price. While most stocks will lose value due to the economy, some may lose value for unrelated reasons that signify long-term problems. Therefore it is important to do your homework before you invest.

* Stick with healthy companies with strong balance sheets. Their stocks will be less valuable when the economy is down, but they often take less of a hit than the stocks of newer or less stable companies. And when the economy improves, there's a better chance that they will improve with it.

* Invest in stocks of companies that are less susceptible to economic problems. There are certain things that we need no matter how bad the economy is, such as food, clothing and housing. These basic needs provide solid investment opportunities no matter what shape the economy is in.

* Remember to never invest more money than you can afford to lose. While it's important to put money aside for investing, it is not a good idea do so if it's going to prevent you from paying your bills. If you don't have any money saved up that you can invest, try reworking your budget so that you can save a little each month.

* Hold on to what you've got. With few exceptions, selling your stocks in a bad economy isn't a good idea. It can be tempting to sell before values get any lower, but if you stick it out until the financial climate improves, you'll be much better off.

Investing during difficult times can be tricky. But you shouldn't give up on investing just because of a temporary economic downturn. If you invest wisely, you could turn a negative into a positive.