As you work diligently to build a healthy financial strategy for you and your family, it can be discouraging to think of a recession sidelining your progress. The
As the economy ebbs and flows, you can make thoughtful choices about what to invest in during a recession. Some investments tend to perform more reliably than others in turbulent times, and spreading your money across different asset types also can help to balance your risks.
Six types of investments to consider during a recession
Choosing what to invest in during a recession depends on a few factors, such as your financial goals, time horizon and
While it's important to not derail your longer-term investing goals by making large changes to your investment mix, you may consider how these various investment types can help meet your financial goals:
For instance, growth stocks in sectors like technology are considered riskier than high-quality stocks, which are more consistently profitable and may have more stable performance. These stocks tend to be utilities, consumer staples companies and real estate—industries that are essential regardless of economic activity.
Bond prices generally move in the opposite direction as interest rates. This is why they often rise during a recession, when the Federal Reserve may lower interest rates to stimulate the economy. However, lower-quality, high-yield bonds issued by less stable companies may not perform as well as higher-quality, investment-grade bonds in a recessionary environment.
3. Index funds & ETFs
4. Real estate & REITs
When considering how to invest during a recession, some raw materials, such as gold and precious metals, could be safe havens. Historically, commodities like these have shown low or negative correlations with assets like stocks and bonds, which means having them in your portfolio could help you balance risk across time. Just bear in mind that industrial metals, like copper, may experience price weakness during periods of slowing economic activity.
6. High-yield savings accounts
The importance of diversification
These securities and assets are common recession investments, and many investors find that crafting a portfolio that mixes them is even more ideal. When you have money in multiple asset classes, you potentially can offset losses in one area with gains in another. Holding bonds and stocks together, for example, combines the possibilities of income from dividends and long-term growth. Or you may want the stability of a savings account while you dabble in ETFs.
Regardless of the combination, the idea behind
Getting help with recession investments
Recessions can rattle even seasoned investors, but you can take actions that help position your money to endure. If there are signs of a downturn on the way, consider it an opportunity to reflect on your investment strategy and make moves to shore it up.