The best investments in a recession - 01/07/22

It’s often hard to read the signs, particularly when markets are on the rise. We often claim to learn from the mistakes of the past, but in reality, there is often another recession just on the horizon. Whether it's arriving quickly or is still a long way off, it's prudent to plan for it.

You certainly don’t want to be part of the panicked stampede of investors looking to divest in a crumbling market, these are always the ones who pick up the tab. Whilst financial advisor can assist you in developing a recession-proof investment strategy, it important to understand where your money resides at all times. If your reserves find their way into something as volatile as crypto, it’s important to know the historical movements of the rates so you can pull the plug before the crash.

Arguably, it makes more sense to invest in something tangible so that even if the worst case arises, you can weather the storm.

So what should form your recession-proof foundations?

In the event of a recession, you might be tempted to sell all of your investments, but experts advise against doing so. When the rest of the economy is fragile, there are usually a few sectors that continue to grow and provide investors with consistent returns.

Consider investing in the healthcare, utilities, and consumer goods sectors if you wish to protect yourself in part with equities during a recession. Regardless of the health of the economy, people will continue to spend money on medical care, household items, electricity, and food. As a result, during busts, these stocks tend to fare well (and underperform during booms).

Dividend stocks is certainly a terrific way to earn money without having to work. Some advisors would recommend looking for companies with low debt-to-equity ratios and strong balance sheets when considering dividend stocks. 

If you're not sure where to begin, dividend aristocrats maybe a good place to start. This category includes corporations that have increased their dividend pay outs for at least 25 years in a row.

Investment property, particularly in the UK is one of the most stable asset classes. If an investor is looking for clockwork income, whilst owning something tangible there isn’t a much better alternative. Cities in the North West of England have seen some of the fastest growing property prices ever recorded, with a strong local rental demand. With developers struggling to meet the needs of renters, the market is likely to continue growing long into 2030.

The bottom line

An approaching recession shouldn't scare you if you're investing for the long haul. Always be prepared to take some profits off the table, and never commit more than your means naturally allows. If you have funds to invest, property, consumer staples, utilities, and health care are all recession-friendly industries to explore. Stocks that have paid a dividend fora long time are likewise a smart pick because they are typically long-established companies with historical strength. If you build a portfolio around these foundations, it gives you the security to fall back when times get tighter.

If you’d like to know more about how to invest during a recession, speak to a member of our team today.

Improve Your Portfolio

Join CompareYields today and discover exclusive investment opportunities in the UK property market.