Investing in ever changing times is challenging. The most important thing is that when faced with economic uncertainty, you are comfortable psychologically with the amount of risk you are willing to take.
For some of us this means keeping gold under the floor boards and maybe a mattress stuffed with cash, but for the most part, what one really needs is diversity. Diversity allows that without all your eggs in one basket, you cannot lose everything overnight, short of a cosmic planetary major meteor strike. Mutual funds which are balanced and professionally managed with at least three rating stars are a fair bet. They will still fluctuate with the market, but because they are chosen with an eye toward diversity, and personal risk level choice, you can usually weather most financial storms.
If you want to buy low and sell high, you will have to be willing to stay on for the long run if stock ownership of specific securities is what you want. If you must choose stocks yourself, be advised that in every down turn there are certain products people will buy no matter what. People will still eat bread, produce, and cereals. You may want to invest in those products that sell in both good times and bad times. People also will use soap, detergent, over the counter health and beauty aides, but they will cut back on discretionary spending. If you want to invest in luxuries, (as the rich are getting richer even as the working class gets poorer), look toward the “small” luxuries, such as high end chocolates, coffee and lattes, spa day stay-cations, and so on. Do some street level market evaluation, noting what you see people, friends and family still buying, using, and needing, even in hard times.
To look into distressed stocks, in order to buy low, and wait out the market until they bounce back up, be sure to choose major past performers with a record of customer loyalty. Apple and other tech companies, Transport manufacturers such as Lockheed Martin and Boeing, are still going to be building machines for decades to come, for example. They have often lost stock price, but always come back up eventually. Again, be prepared to know what amount of time you can wait, and what you can bear with your comfort level, while the economic downturn recovers.
When in comes to energy stocks, this is trickier. People need fuel and energy, but the trend toward alternative energy, solar, wind, geo thermal, smart grids and so on, although slow to begin, is eventually going to have to replace dirty fuels that pollute and are rapidly becoming more and more costly to harvest. Invest small amounts in renewable alternatives, and increase over time.
Real Estate is especially low right now. Most people are afraid of it because people tend to shy away from good buys for a few years after any major bubble bursts. When the tech bubble burst, people stopped buying Apple, for example, but that bounced back over time. When the telecommunications bubble burst, the same thing occurred. Now there are thousands of foreclosed and distressed real estate deals out there, but people are too bubble burst blasted (a form of turtle shell shock, as it were) and do not even wish to invest in their own homes if they owe more than what the market will now offer. This could cost you dearly.
Over the next ten years, housing price will rise again. The trouble is trying to predict the market low. Just know that each and every day we are closer to the market bottom in pricing. Although we cannot know the precise day of lowest prices, real estate, especially in hard hit areas such as beachfront on Hawaii Island, for example, it is likely these homes will double in price again in ten years ahead.
Over all, the same rules apply for investing in hard times as they do for investing in bull market times. Do not invest more than you can afford to lose. Diversify your portfolio. Do not buy or sell based on emotion, but on facts, figures and historical patterns. More than anything else do not go deeper in debt or try to pay off bills with credit cards. This will just put you deeper into a hole. Buy low, sell high. That is the best advice, and right now, in many investments there is a lot of low out there, but be careful, and choose what is essential and necessary for people to live, food, housing, renewable energy, and health products are staples human beings cannot do without.