When the market is going great, many investors forget that a recession is just around the corner— until it actually happens! As recession happens every few years, it’s important to prepare for it well ahead of time. By understanding and preparing for the worst, you can avoid the mad rush to cash out your stocks at a loss. Most importantly, stocks can do well even during a recession, it just comes down to knowing which ones and investing intelligently. Though a financial advisor can become an indispensable source during a recession, below, you will find some great advice on what to invest in for a recession-proof portfolio!
- Select Dividend Stocks For Reliability
As a way to generate passive income, dividend stocks are a solid investment. However, it’s beneficial to choose companies with good balance sheets and a low debt ratio. If you’re not sure how to begin your research, try dividend aristocrats. This list has a breakdown of companies that have had great performances spanning at least 25 years.
- Invest In Real Estate
The downturn of the 2008 real estate market was truly the stuff of nightmares for many homeowners. However, for those that invested in real estate, it was a fantastic way to turn a profit. The recession is a great time for investors to buy up properties as the value of homes declines during this time.
Moreso to the point, when you rent out the property you’ve just purchased to a solid tenant, you have a great passive income. As the real estate market starts to bounce back, you can sell the property off for a handsome profit.
- Choose Precious Metal Investments
Even during a market downturn, precious metals such as gold and silver tend to keep their values. The downside is that the demand for these commodities is also on the rise during a recession, therefore, investors will often have to spend more to purchase precious metals.
There are different methods available for acquiring precious metals. The most reliable and straightforward way is purchasing coins or bars from a reputable dealer. Though not the same as buying security, it still performs well in a similar fashion.
ETFs are another solid option for investing in the precious metals market without directly purchasing securities. For those looking to save for their retirement, gold IRAs are another reliable option for a variety of reasons.
- Invest In Your Own Skills
It goes without saying that it’s possible to lose your job during the recession. However, if that happens to you, you can still make ends meet by investing in yourself. Furthering your own education and developing your technical skills can help you land a more reliable and better job in the future.
It’s also a good idea to start paying down your debt if you have a feeling that your income may be in trouble. Having the ability to have fewer expenditures means being safer should a recession hit.
- Choose Core Sector Stocks
Though many investors tend to avoid stocks altogether during a recession, it may be the time to buy UK stocks. Even when the economy takes a hit, there are certain sectors that tend to defy the odds and still perform well regardless of market values.
Choose core sector stocks to invest in such as utilities, healthcare, and consumer goods because they will keep performing well! People will still shop for healthcare products and consumer goods while also paying for electricity, regardless of how badly the recession is affecting them. As such, the stocks that fall into these categories remain viable investments.
Long-term investors understand that a recession is inevitable and they don’t worry about their investment portfolios. You may want to move some of your investments during the recession, but for the most part, keep your portfolio intact and sell when the economy bounces back again. Even if you consider selling and getting back into investing after the worst is over, no one can truly predict the volatility of the market.
A better method for investing is viewing all of your investments as long-term solutions and looking at their asset value. Having made that point, it’s still important to invest in recession-proof market sectors. Ultimately, it’s wise to select from a list of companies to invest in that perform well with many years of experience as it helps them a cushion against an economic downturn.