What is a common strategy employed by investors during a recession?

What is a common strategy employed by investors during a recession?

• A. Increase exposure to high-yield stocks
• B. Sell all stocks and move to cash
• C. Diversify into stable income investments
• D. Short sell high volatility stocks

Answer: (C)

During a recession, a common strategy employed by investors is to diversify into stable income investments. This approach reflects a desire for more predictable returns and lower risk during uncertain economic times. Stable income investments, such as bonds or dividend-paying stocks, generally offer less volatility than growth-oriented stocks and provide consistent income streams, which can be appealing when the economy is struggling. Investors may seek to preserve their capital and reduce risk exposure, making the shift towards more secure investment options a logical response to the economic downturn. This strategy aligns with the broader goal of maintaining financial stability in a challenging economic environment, where the likelihood of stock declines is heightened. Other approaches, while they may be considered by some investors, typically involve higher risk or potential for loss during recessionary periods, making them less common and often less prudent in this context.

During a recession, a common strategy employed by investors is to diversify into stable income investments. This approach reflects a desire for more predictable returns and lower risk during uncertain economic times. Stable income investments, such as bonds or dividend-paying stocks, generally offer less volatility than growth-oriented stocks and provide consistent income streams, which can be appealing when the economy is struggling.

Investors may seek to preserve their capital and reduce risk exposure, making the shift towards more secure investment options a logical response to the economic downturn. This strategy aligns with the broader goal of maintaining financial stability in a challenging economic environment, where the likelihood of stock declines is heightened.

Other approaches, while they may be considered by some investors, typically involve higher risk or potential for loss during recessionary periods, making them less common and often less prudent in this context.