Making Money in a Down Economy

The phrase "this is when the rich get richer and the poor get poorer" is only as true as each investor makes it. It is true that having enough money to continue making investments has an impact, but it is all relative.

All of us know someone who lost 40%+ of their net worth over the last year, the question is have they done anything to recover that loss?

As an example let's say you lost 40% of $1 million when the market tanked. When the Dow was at 6500 you could have bought into quite a few stocks that were down but were key to the recovery of the U.S., in other words, if they failed things would have gotten a lot worse. These investments, AIG and CITI for example, would have provided an average of ~550% return within the first 90 days after the stock market bottomed out. If you would have taken ~15% of your remaining net worth and invested that money in these two stocks you would have recovered the 40% you lost and been up. It may seem like this sounds easier then it really is... you know hindsight is 20/20, but at the end of the day managing your money is up to you. Trusting a low level number cruncher or customer support rep at some money management firm is not going to get you your money back... no offense to them but these are the same people who recommended or were invested in Madoff.

Anyone can make money in an up or down economy. To be successful with any investment you have to be willing to do the following;

1. Put some money at risk, no matter how small. Too often we get caught up in the thought that we need to look for an investment that can provide a 300-400% increase on a minimum of $50,000 or it isn't worth the time. I will use a baseball analogy here, if you hit a bunch of singles you will score runs. Grand slam or strike out is not a smart way to invest money. Start somewhere and realize that you won't get rich overnight but in time you will build real wealth and your money will be working for you.
2. Spend the time to understand where you can get the best return for your money. Don't just blindly trust anyone with your money. The great thing here is that with the internet and many talk shows you can hear what the true investment experts think are good investments and why. You can follow their advice for a while and overtime you will learn what to look for.
3. Pay attention. Managing your money is an ongoing commitment. You can't set it and forget it. Once you set up an account with one of the online trading platforms you can track your investment performance and set sell maximums and minimums... which leads into the final step.
4. Stop making excuses... Start today! There are so many great tools out there to track your investments and minimize losses. TDAmeritrade, eTrade, Schwab... You can get started with any one of these sites in a couple of days and with less than $100.