How to Make Money When the Stock Market Is Down
- 1). Buy stocks that pay a high yield dividend. If the market is going no where fast, buying dividend paying stocks will essentially pay you to wait. Some companies pay out a percentage of their earnings, and many dividend paying companies actually pay dividend yields that are higher than a high yield saving account.
- 2). Train yourself to become a day trader. The stock market has seen unprecedented amounts of volatility in the last decade. If you can learn to buy and sell stocks at the appropriate times, you can make money just like the professional traders.
- 3). Become a short seller. By shorting the market (e.g. short sells), you are expecting a certain stock or stock market index to go down in value. This is inherently dangerous and better left to active traders, but the results can be highly profitable when done correctly.
- 4). Create a CD ladder by purchasing high yield CDs. CDs aren't the most exciting and highest yielding investment option, but they do provide security and fixed income while protecting your capital. Making 3 to 5 percent per year always sounds better than losing 40 percent in a down market.
- 5). Store your money in high yield savings accounts. Sometimes the best way to make money in the stock market is not to buy stocks at all. Be patient, wait until the time is right and the stock market has digested all the bad news. Until then, keep your money in an high yields savings account and make money on the interest payments.
- 6). Buy government bonds. If the stock market goes down, chances are the bond market goes up. Take a look at safe fixed income investments like Tbills, I-Bonds and US Savings bonds.
- 7). Purchase high yield bonds through mutual funds or ETFs. Buying bonds isn't the easiest investment choice for the average investor, and buying a group of fixed income bonds--whether they be US Treasuries, corporate bonds or municipal bonds--is a solid investment advice.
- 8). Buy severely beaten down stocks. When a company give negative news or doesn't meet it's sales forecasts, investors will often punish the company and sell their stock. This can often lead to a stock being "on sale" and present a good time to buy the stock at a substantial discount.
- 9). Slowly buy index funds over a long period of time. Also called Dollar Cost Averaging, this is one of the best proven methodologies in the investing community. Occasionally, a downturn in the stock market will be so severe that it lasts for several months or years. This presents a great time to buy smaller amounts of stocks (through an index fund or ETF) each month. When the market improves, you could have a substantial profit by being patient and waiting out the downturn.
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