Imposing Advantages of Investing in Stocks during Recession

By Charles Hopkins Published 01/22/2009 | Finance
Many people wonder is it a good time in investing stocks. This is a natural question one can expect in the time of economic recession. As of now share market has already reached the rock bottom. No financial experts expect a further downward trend in the stock markets as it has already reached the minimum level. So is it not the best time to purchase the shares?

In this situation one can surely believe that the stock market is a buyers market now. One can get any kind of stocks at the cheap rate. More and more foreign and domestic investors are liquidating their investments in shares to cope up with the scarcity of fund available to them. The availability of all good shares is very well abundant in stock market now. If you are looking for the share of a good industry, you can get them at a moderate or cheap rate now. This is the primary reason for proceeding with investment in economic recession.

Second reason which supports the theory of investing in stocks during recession is that the discoveries of economic reviews. Many financial reviews and experts consider the present economic recession as a short term phenomenon. They expect a complete reversal of the recession in a year. This means that the stock markets are expected to bounce back to its high levels within a year or two. Hence if you purchase good shares at this point of time, you can be assured of selling and getting good returns in a year or two.

One thing is certain, present market is not suitable for short term gains and investments. The market is perfect for a medium or long term investments. Investments for 2 years to 10 years are really worth in the present economic scenario.

A third reason supporting investments in stocks during recession is the cut in interest rates by banks. As a measure to counter the economic recession, many banks have cut down prime money lending rates. This is very helpful for the investors. They can avail loans as much they want at low interest rates and invest in high yielding shares. You can be assured of multiplying the revenues by just transferring the loan amounts to shares.

As already mentioned there are many advantages of investing in stocks during recession. But you should be extremely careful in selecting the best shares. All shares are not good for investments. You have to go through the prospects of the company in which you want to invest. Also you should verify its past credentials and future predictions. The demand of the product of the company is also to be assessed before taking the decision on investments in shares.