How to Invest During a Recession: Strategies to Safeguard and Grow Your Wealth

Riding through the gloom of a recessionary tide may be trying, but it’s also an opportunity to shore up your portfolio and help protect your wealth over the long term. Economic downturns are generally characterized by volatile, unpredictable and downward market pressures. But there are strategies you can use to protect your investments and still seek out growth when you focus on stable assets.

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Perhaps one of the best ways to invest during a recession is to put money into defensive stocks. These are companies in industries that don’t tend to dry up in bad economic times because they produce essential goods and services. Common defensive sectors include:

Healthcare: Healthcare stocks remain resilient—regardless of economic conditions people still need medical care and the medications and services related to it.

Consumer Staples: Recessions don’t hit hard for companies that make the basic consumer goods like food, beverages or household products because people need to still eat, drink and wash when times are tough.

Utilities: Defensive companies are utility services that provide water, gas and electricity because these are essential services immune to economic cycles.

The majority of defensive stocks pay dividends, which means that even if stock prices go down, you have a source of income. Focusing on such trusted industries does help you make your portfolio more steady, wise and risk free.

Traditionally passed as safe haven bonds and fixed income securities in recession. Bonds are a more stable return, when stock prices are volatile. U.S. Treasury bonds, and government bonds in general, are seen as some of the safest investments because they are backed by the federal government. Reliable Corporate bonds from high rated companies can be highly rated too, as they may come with high yields.

Investments in fixed income generate consistent returns and act as an element of diversification in a portfolio that can safeguard against losses in equities. When choosing bonds, a combination of short term and long term bonds is a better pick. Short term bonds allow you to get to your money quicker but longer term bonds can yield you more.

Usually, the very best thing you can do is to invest in dividend stock. A recession proof portfolio can include a few dividend paying stocks. They are well–established and financially stable companies that find it easier to survive the economic downturns. The stock market can be volatile, but dividends help provide you with steady cash flow, regardless.

Focus on companies which have a long history of paying and raising dividends, because if an investor can accomplish this, they are likely to outperform the market. Some of the sectors that firms within that give priority to dividend payout include Utilities, telecommunication, and other firms in consumer staples. And reinvesting dividends can compound your returns, which can be a big win during a market recovery post recession.

Gold and other precious metals have a reputation for holding up well during a down economy. People often view gold as a safe haven investment because it keeps its value even when other investments fall. Gold isn’t the only thing that affords protection against inflation and market declines: Silver, platinum and other metals can also offer this protection, but they tend to be more volatile than gold.

There are different ways to invest in precious metals. Investing in precious metals can at least hedge against recession risks and help with portfolio stability, and (although at the cost of its other qualities) actually contribute to reduced overall risk of the portfolio.

In a recession, cash is king, and you want to have enough cash in reserves. Cash gives you the flexibility to invest in opportunities that appear only later if the price continues to drop or to cover some of the unexpected expenses without selling at a loss value of your other assets. Saving at least three to six month’s living expenses into an emergency fund is a smart financial move.

Another advantage of keeping some cash set aside as well is that you are always ready to jump at buying opportunities when they become available at low prices. When the market recovers having the option to buy undervalued assets can reap the rewards big time.

It’s also possible to invest in real estate, even during a recession; property values recover over the long term. Rental properties in stable markets are a type of real estate that will give a steady income. But you have to be wise about real estate investments as the prices of properties and the demand for rental hollo around the economy.

If direct real estate investment seems like too much of a risk, take a look at Real Estate Investment Trusts (REITs), which allows you to invest your money in a diversified portfolio of properties without actually having to own something physical. In a downturn, REITs that focus on industrial, residential real estate and even healthcare are often more stable.

Last but not least, back yourself long term if you invest during a recession. Fortunes will turn, markets rebound, and coupons will go back to being merely a gimmick for paid subscribers. Holding a patient perspective helps you fight off from panic selling in the downward movements and stay in the game to build your portfolio.

Review with yourself your investment goals and reconfirm whether your strategy matches your risk profile. Don’t get caught making impulsive decisions based on short term market fluctuations, and know that recessions often follow periods of enormous economic expansion.

Making investments during a recession means giving it some thought, diversifying and taking a long view. You can safeguard your portfolio as well as detect growth opportunities by concentrating on defensive stocks, fixed income assets and alternative investments such as precious metals.

Examining other assets, including Monero (XMR)—by looking at the 1 XMR to USD exchange rate—is also potentially valuable in terms of diversification if you want to find investments that don’t trend so closely with the main ones. Recession-proofing your portfolio is all about resilience and about being prepared – it’s about making sure you can build and hold onto wealth and ensure you are positioned for growth even in the future.