by Moe Zilla

Created on: July 28, 2010

It's possible to earn some big money on the stock market - if you learn a few basic rules about the economy. First, know what a recession is: instead of growing, the economy starts to contract, which means that it's affecting not just a few businesses, but the entire economy. This inevitably means that people will, in general, have less money - as a result of lay offs or hard times for their small businesses, as the waves of the recession move through the economy. But with some careful planning, you can have a portfolio that's already snatched up the best recession-proof assets - and when the recession finally arrives, their market value will soar!

So what's a recession-proof investment? Remember that in a recession, people have less money, so they cut back on unnecessary purchases like travel, and vacation. This means that you want to invest more in those companies that make everyday items, which people will always purchase, regardless of their economic situation. Look for the manufacturers of things like toothpastes, shampoos, and even cigarettes. "People are buying these things regardless of economic conditions," advises an strategist at Standard & Poors (in an interview with Marketwatch).

And they also note the other big advantage of the bigger "consumer staple" stocks. In general the stock market will shun stocks altogether when the economy is only limping along, so it's hard to make money from just the increase in a stock's price. But fortunately, the larger companies also distribute extra money in the form dividends to their stockholders - which is basically a share of the profits that's given regularly to the stockholders. And "Consumer staple" companies aren't the only ones paying out big dividends. Marketwatch also notes the same pattern with pharmaceutical stocks. Think of it as their way of rewarding the Wall Street investors who funded the research that led to their profitable drugs!

Both Marketwatch and Business Week also recommend investing internationally. ("Europe and Japan have more diverse economies," Marketwatch notes, "and a strong consumer base that can support corporate earnings growth even as U.S. demand slips.") This is good advice even without the threat of a recession, simply because it produces a much greater diversification of your portfolio. ("Most investment advisers say Americans don't invest enough of their stock portfolios overseas," Business Week notes.) All the stocks in a country may be affected by a recession - but unless there's a global recession, you should be able to find some high-growth opportunities in other countries!

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