Recessionary periods are inevitable. Now is as good a time as any to prepare to take advantage of the next recession. Here are three ways to do just that.

1. Use Dollar-Cost Averaging

One of the first signs of a recession is usually a brief but sharp sell-off in the stock market. Then the real losses begin, but it's important to note that the market will hit bottom and start back up well before the end of the recession.

Knowing that cycle, you can take advantage of a declining market through the dollar-cost averaging method of investing. If you make monthly contributions to a qualified retirement plan, you are already using the technique. But when the market starts to plunge, you might consider increasing your contributions to your retirement savings or build a stake in a separat෴e investment account.

When you dollar-cost average, you reduce your overall 澳洲幸运5官方开奖结果体彩网:cost basis over time. Then, when the price re🦋bounds, your real profit will be higher.

For example, if you invest $500 a month in a mutual fund selling for $25, your contribution buys 20 shares. If the share ﷺprice drops to $20, your contribution buys 25 shares. Your account now has 45 shares with an average cost basis of $22.

When share prices rebound, your contribution buys fewer shares each month, but the current share price will be higher than your cost basis.🃏

2. Buy Dividend-Paying Stocks

If you are going to hold stocks during a recessionary period, the best ones to own are usually from established, large-cap companies with strong 澳洲幸运5官方开奖结果体彩网:balance sheets and 澳洲幸运5官方开奖结果体彩网:cash flows. ♐Not only are these companies better situated to weather economic downturns, they♏ are more likely to pay shareholder dividends.

For investors, these stocks have three strong points. First, if a company has a long history of paying and increasing dividends, you can have peace of mind that it is financially sound and can survive most economic environments. Second, dividends provide a cushion. Even as share prices decline, you still get a 澳洲幸运5官方开奖结果体彩网:return on your investment. Finally, dividend stocks tend to outperform non-divide🔯nd stocks during market downturns, because of those first t💟wo points.

The best way to own dividend stocks is typically through 澳洲幸运5官方开奖结果体彩网:mutual funds or 澳洲幸运5官方开奖结果体彩网:exchange-traded funds (ETFs) that invest strictly in dividend-paying companies. Funds that invest in companies with long histories of paying dividends and strong track records of increasing those dividends tend to generate high current yields and capital 澳洲幸运5官方开奖结果体彩网:appreciation when the stock rebounds.

Funds that꧑ i❀nvest strictly in dividend-paying companies may not outperform the market during market rebounds. This is because they focus on companies that provide stable returns across market cycles.

As the market rebounds, you ⛦might move some money away from your dividend funds, but you should always maintain a portion in them as a defensive measure.

3. Invest in Consumer Staples

Even during recessions, consumers need to buy food, drugs, hygiene products, and medical supplies. These are consumer staples, which are🐬 the last items to be cut from the family budget.

So while companies selling high-end electronics and other discretionary products experience a decline in revenue, companies selling food products and other necessities do not. Because of this, companies in the consumer staples sector are sometimes called 澳洲幸运5官方开奖结果体彩网:defensive stocks, since 🗹they🦋 tend to remain resilient even when the economy falters.

Data shows that these types of companies outperformed the 澳洲幸运5官方开奖结果体彩网:S&P 500 during the last several recessionary periods.

Consumer staple companies include Johnson & Johnson, Procter &꧅amp; Gamble, Conagra, and Walmart. These companies also pay good dividends, which strengthens their defensive profile.

There are mutual funds that invest strictly in consumer staple companies. For example, the Fidelity Select Consumer Staples Portfolio invests a minimum of 80% of its assets in companies engaged in the manufacture, sale, or distribution of consumer staples.

The Bottom Line

While recessions are inevitable, their onset and duration are usually unpredictable. But there are ways to position yourself🎶 and your investments to weather the storm and even profit🦋 from it.