What to Do in a Recession?

Panic. Thats the first thing most people do when the economy starts to turn bad. Its difficult to watch all of your investments lose value. However, its too difficult to try and "play" the market in times like this. Case in point: the DOW dropped 465 points today when the market opened. At the end of the day its only down 85 points. If you were to sell at the bottom you would have missed the upswing that took place immediately thereafter. Its just too difficult to time. You may win some, but you'll lose too.

The best strategy is to maintain a balanced long-term portfolio that is diverse enough to handle the downswings and take advantage of the upswings. In the meantime, prepare yourself for the possibility of a recession fueled layoff. This means stocking up on savings and securing a backup line of credit in case of an emergency. Put your savings in a short-term CD or high interest savings account and stock away 3-6 months of emergency funds.