What are the Smartest Assets to Invest In During a Recession?

6 Min Read

Investing during a recession can be risky yet rewarding. This is after understanding which assets to invest in and generating the best return on investment (ROI) despite the adverse financial climate. Recessions are cyclical and eventual. Therefore, the best way to counter these economic downturns is to be prepared. Plus, investors should not succumb to the panic that drives many investors to sell stocks and get as much cash as they can. It’s important to know that even in financially depressing situations like a recession, stocks perform

Whether it’s stock in core sectors or precious metals, there are ways for investors to make a profit using recession-resistant investment plans that equally protect and diversify portfolios. This is with the help of a financial advisor, of course. Additionally, smart investing during a recession breeds a long-term mindset that leaves investors with countless possibilities once the recession ends. Here are some savvy investment opportunities investors should consider during a financial crisis. 

Stock Investments in Core Sectors 

During financial downswings, you may be discouraged from investing in stocks because of fear that the declining market will strongly compromise their value. However, various sectors maintain a solid appeal to investors during a recession. 

Investors immersing themselves in potential investment opportunities during a recession can examine core sectors that offer strong value amid challenging economic conditions. Some of the core sectors to consider investing in stocks and equities include: 

  • Healthcare 
  • Consumer goods 
  • Utility companies

Regardless of the financial climate, people still have to pay money for medical care and items. Also, people have to pay for utilities, food, and household items to maintain their standard of living amid a recession. During financial crises, healthcare, consumer goods, and utility stocks perform well compared to economic booms, where they usually underperform. 

Exchange-Traded Funds 

Exchange-trade funds (ETFs) can give investors downside protection for investments, leveraging techniques to mitigate or prevent the devaluing of the investment. 

ETFs allow investors to manage a recession by reducing risk through diversification. ETFs specializing in non-cyclical and consumer staples are particularly popular during financial downturns. They outperform the broader market, as evidenced during The Great Recession, and will continue to do so during future recessions. There are different tiers of ETF investments investors can explore, including XLP (top-tier) and  XLU (second tier), which provide strong liquidity and value amid recessions.

Index Fund Investments

Index funds are good long-term investment strategies for investors to manage tough economic funds. Additionally, ways for them to see some encouraging value over time. People who invested in S&P 500 index funds during the market’s peak in 2007 before the financial crisis saw annualized returns of around 8.4% in the nearly 15 years since. Also, people who bought index funds ahead of the early 90s recession would have achieved an annualized return of around 10% over three decades. 

Investors see promising returns from index funds regardless of the economic climate and should consider them for the next recession, which, while moderate, could last longer than recessions in the early 90s and 2000s as the economy recovers from the pandemic. When purchasing index funds, especially S&P 500 index funds, investors bet on long-term business success. As mentioned above, it’s a good bet to take as recessions don’t last too long, and businesses usually bounce back. Think about this while searching for assets to invest in.

Precious Metal Investments 

Precious metals such as gold and silver typically perform well in the market during a recession. Investments in precious metals usually involve the purchase of coins and bars from coin dealers. People more interested in buying precious metal securities should turn their attention to the aforementioned ETFs. They represent an investment collection within a single industry. And, in this case, the industry is the precious metals market. Investors can buy a gold IRA when saving for retirement. 

The one risk with precious metal investments is that the price of the metals increase as demand for them rises during a financial crisis. However, like the other investments mentioned above, precious metals retain long-term value and protect investment portfolios from volatility. There are other precious metals like platinum and palladium that can also net positive returns during economic downturns. 

Investing during a market crash can be scary. But, with a long-term strategy and a dedication to diversification and finding the best assets to invest in, investors can net good value as the economy goes through its peaks and troughs.  

Share This Article
Adam is a born and bred entrepreneur who thrives on developing the successes of others while equipping them with the knowledge and resources to create real opportunities for themselves. He has had a passion for finance and investing since high school which led him to create TheStockDork.com as a resource for all investors. Before starting TheStockDork.com, Adam founded and operated an Investor Relations Firm. Throughout the years, he has transformed into a leader who has blazed the trail for many new investors and traders by showing them the ins and outs of obtaining financial freedom.