Recessions are no fun for anyone, especially people who are trying to grow their wealth. No one is hiring; in fact, many people are out of work. Interest rates go down, so while it’s a great time to make big purchases, savers are out of luck. However, there are ways for investors to grow their money outside of a savings account. Some investments can work well, even during a recession.
Traditionally, defensive investments are considered less than ideal. They may hold their value well and provide a stable dividend return, but they’re not very exciting. They usually don’t have a lot of potential for big growth. During a recession, these are great investments to make. Examples of defensive investments include utility stocks and pharmaceutical companies. These are industries that will always have steady demand. Their stocks are likely to hold their value even during economic downturns.
Another great investment to make during a recession is real estate. Not everyone can afford to buy a home or a lot when interest rates are low, but almost everyone can buy some shares in an REIT, though. Real estate investment trusts sell shares to the public. REITs are collections of property. Some are specific to the hospitality, retail, or medical industries. Others have a mixed portfolio. REITs are known for paying steady dividends, usually on a quarterly basis.
US treasuries are another great investment during a recession. Investing here helps to guard against inflation. Treasuries can be bought by any American. All they need to do is set up an account on TreasuryDirect.gov. Common US treasuries include 30-year bonds, savings bonds, short-term bills and treasury notes. US treasuries are known for their reliability. Although an investment like a savings bond won’t pay a lot of interest, no one is in danger of losing their principal, as they would be in the stock market.
Remember, it’s important to have a diversified portfolio. Spreading investments across a number of sectors and instruments is the best way to protect yourself. It’s hard for non-specialists to read the market and get the timing right. No one should invest money they can’t afford to lose. Low-risk investments like high-interest savings accounts can still be worth it, even during a recession.