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If there are several months in a row when job reports come in clearly very weak (well under consensus estimates), it can be a sign of an upcoming recession, especially combined with poor unemployment figures. Investing in the stock market during a recession can be a scary time because everybody's revenue is going down. There is talk all over the business and regular news channels about how bad things are. However, as far as the investment standpoint goes, it is the best time to be in the market because there is so much money to be made. A lot of people do not start getting into the market until it is at all-time high not knowing that, generally speaking, it is one the worst time to make such decisions.

How do you know when the bottom is so that you can buy at the right time? There are millions of participants in these stock markets so there are too many different factors to take into account so the truth is no one will ever know. If you see great deals, you are probably going to buy regardless is the stock does go down more. Things change too fast so your only choice is to buy quickly. In addition to that, you should buy short-term puts to protect yourself in a bad recession where the stock market is going down because you will have a way to make money if that market keeps going down in the short-term.

Pay attention to which countries are coming back strong and find companies that get a lot of revenue from those. Broadly speaking, when a recession comes, the entire world follows as well because everything is tightly intertwined. What you want to look out for its the numbers versus the previous quarter that are coming back the strongest, in which countries those are in and the stocks that are highly dependent upon those. They are going to show much better earnings in the short-term and people are going to look at them as a guiding light making them go up substantially. Consider buying one-year out call options on some of the stocks that have dropped the worst. Thus, you will be able to slowly load up your portfolio again; the stock price of those shares can go up in the long-term and you will have a decent percentage gain. There have been companies that had a significant gain within a year so, as an investor, you would want to profit from that. Moreover, a company can go from $5 a share to $75 a share in a matter of several years.

You want to invest in companies that have good balance sheets: that are rich on cash, rich on investments and have very low debt. When you go into recession (that will happen eventually as they come and go), those companies that have really poor balance sheet will get pressured worse than any other stocks. If people see a lot of debt in the balance sheet or the company makes extremely slight profits, they start selling their shares, thus, making the situation even worse. The amount of companies that went bankrupt was phenomenal during the Great Recession, especially the big financial institutions despite the fact that their names were associated with relatively safe investments.

There are also practical moves you can make during a big recession if you have already invested in some way which is shorting the automakers. It does not matter how well-run the company is because no one actually buys new cars at this economic state. First and foremost, these stocks are going toward unprofitability no matter the balance sheets or anything about the company. The second move you can make is shorting housing stocks for the same reason. The credit goes to nothing and no one wants to loan money on housing or spend their saving on it. You can invest in GLD, which is the gold ETF that tracks the price of gold, because people see gold as s safe haven during some hard financial times and it becomes fairly stable at these times. Keep at least 30% of your portfolio in cash during an entire recession because you want to be prepared and have cash available to make moves at the moment a turn happens.