by Jeremy Rutherfurd

Created on: July 02, 2008   Last Updated: July 30, 2009

The stock market is sliding, lay offs are increasing and more and more people are applying for unemployment benefits. Rising commodity prices, especially oil and agricultural goods, are hitting the consumer hard, forcing households to spend more as a percentage of the family budget on gasoline and food.

Economists my quibble about whether the US is in recession or not, but one thing looks certain: things are going to get worse before they get better. Consumer confidence is low and falling. Whatever the reality is, shoppers certainly feel we're either in a recession or entering one.

So how does one invest in such an environment? This depends on the level of risk you are willing to assume.

T Bills, CDs

If you're an ultra-conservative investor, parking your money in US Treasury bills or bank certificates of deposit (CDs) should suit you well. While the stock market sinks and shareholders see their investments dwindle in value, your savings will be accruing interest.

It may not be much, but a few percentage points' gain is better than losing money. Be aware, however, that your savings may be earning less than the rate of inflation, in which case the value of your money will be falling relative to the cost of goods.

You can buy T bills directly from the US government at the TreasuryDirect Web site (http://treasurydirect.gov/). You can also buy exchange traded funds (ETFs) that invest in T bills: SHY, TIP, TLT, IEF.

To find the best local rates on savings accounts and CDs, go to Bankrate.com. Two online banks that offer competitive rates on savings accounts and CDs are ING Direct and HSBC.

Bonds

If you're willing to assume more risk, try bond funds. These tend to do well when stocks fall, and they should garner you higher returns than Treasury bills, CDs or savings accounts, although they don't have the full backing of the US government, as T-bills and FDIC-insured CDs and savings accounts do. (Unless you buy bond funds that invest in government-issued bonds, of course.)

Vanguard offers a wide range of bond funds, including those of the mutual fund variety and exchange traded funds that invest in bonds.

Fidelity has bond funds as well. Bond-focused ETFs are also offered by iShares.com and PowerShares (called "fixed income" products).

If you want to buy corporate bonds from a specific company, it's best to contact the firm directly.

Riskier Investments

For the investor who's more daring and is willing to buy stocks, recessions can be a great opportunity

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