Recession Proof Investments

by on July 21, 2011

Often during a recession, businesses and investors change the way that they invest.  They move out of cyclical stocks and into more stable investments that can better weather the financial storm that usually comes with a recession.  If you’re looking to invest during a recession, then you may want to read our list of recession proof investments.

Here are some investments that are least affected by a recession:

1. Investment in Banks

During recession, banks are safe to invest in. When stock market falls, most of the investors invest in FDIC-insured means like CDs and savings accounts. Good banks provide small business loans at low rate of interest to recession struck investors. Big banks, which operate in diversifying fields like, insurance, commercial banking, investments, and strategic advisory services, provide stable dividend income to its investors.  Bank of America is one such example.

2. Real estate

It is a major area of investment during recession. Investor’s main focus is on cash flows and not on appreciation of properties. Apart from this, investor’s interest also lies in investing in mobile home parks.  The properties, which are on rent, can be a good source of cash flow for investors.

During recession purchasing of real estate gets slow as most of the people don’t have enough finance to invest in property due to which real estate prices tend to decline. If you have enough finances to put into real estate then it would be a good time to purchase some property at lower price, which you can cash in for profits when the market becomes stable and the real estate prices are soaring.

3. Equities of those countries which are less associated with Recession struck nations

It is a safe option to invest as these equities are least affected by recession. Investors can diversify their portfolios by investing in these equities. For example: The Asian and Oceanic markets are the least allied to the U.S. stock market globally. Thus, these are main point of attraction for investors in times of recessions.

4. Pharmaceuticals

Well-established pharmaceutical Companies can serve as a good platform for investment as it is practically true that people will never stop getting sick. Apart from best-seller drugs, there are thousands of drugs, which these Companies have in their store. For example: Pfizer, Inc. a pharmaceutical Company has a yield of 5.6% and is producing heavy cash flows.

5. Timber

Timber, a solid commodity, which is not associated with the market, performs well during times of recession. It persuades portfolio investment and in real terms, log prices have increased to around 2% over and above the inflation. The average annual return for timber is more than 15% from the past 20 years. Thus, timber investments can protect investor’s funds as well as provide noteworthy returns on investment.

6. Stocking up

Recession offers extensive buying opportunities for those who want to earn profit in long term. Hoarded stocks can be sold when markets are in boom.
The important thing to know is when the right time to buy the stock is. Don’t buy when the market is crashing down because you never know how much a stock might fall once it starts falling. The best thing would be to wait for a while till the stock market reaches its bottom and then when stocks slowly start to become stable then you can jump in and buy potential stocks.

You may want to avoid penny stocks when the market in vulnerable because it’s risky to invest in unstable companies and you never know when they might fall especially during the period of recession.

7. Foreign currencies

Investment in foreign currency, also known as forex trade,  is profitable and prevaricates against declining value of dollar. For investors who are looking to diversify into other currencies, the Euro being liquid and different Asian currencies being undervalued can be a good choice for investors.

8. Entertainment

During recession, entertainment industries flourish as people who are struck by recession take resort to entertainment modes to get rid of their problems. So, this area can be tracked for investment.

9. Investing in Precious Metals

Precious metals are rare naturally occurring elements in nature and of very high economic value. Invest in coined metals such as gold, silver and platinum are fairly safe investments as they are not intensely affected by the fall of stock market.

The tremendous demand of these precious metals in form of art and jewelry never run out and that’s one of the main reasons for their steady growth. The rising demand of silver and platinum metal for the industrial usage has driven its prices high.

Though nothing can provide 100% security for your finances but these are the most reliable options which anyone can get.

{ 7 comments… read them below or add one }

Brett February 24, 2012 at 8:22 am

Invest in banks in a recession? Are you crazy. Most shareholders of global banks got practically wiped out in 2008! You’d have been safer burying your cash in your yard.
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Richard Hughes May 17, 2012 at 8:57 am

I would definitely agree with tip number 2.

Property is a great thing to invest in if you have the capital available. Now is a good time to get into the property market whilst prices are low due to the recession. Then, providing that you have the patience to wait for the economy to pick up, you can sell it on later and make a tidy profit.

Plus you also have the opportunity to rent out the property whilst you wait for the market to stabilise and generate an extra income in the process.

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GoWest December 12, 2012 at 2:46 pm

During recession, the general trend is for interest rates to plummet on savings accounts etc, and inflation raises sharply. Therefore, investing in a bank at such times, is less of an investment and more of a safeholding. It will not bring you much in the way of profit, but your cash is likely to be safer.
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Top penny stocks June 20, 2013 at 9:12 am

i mostly invest in REITS stocks as it give a higher dividend. I plan to build up a dividend portfolio so that it will become by additional source of income.

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Jenny Bravo July 11, 2013 at 10:13 pm

Great article! I think you are right on 1-9. However, people on a limited budget need to look growing fruit trees and metals. I go to garage sales and thrift shops to find silver / gold under market. If I have a few hundred dollars, I buy a few silver coins. But, when I’m low on cash I look for cheap gold or silver in alternative places. find-silver.com…thx JB

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John Douglas September 1, 2013 at 2:08 pm

Very true information here although at this point I think the stock market is hitting a ceiling and insiders are worried that the housing market may be about to hit another bubble. So I’d be cautious of entering these markets.
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Andrew October 29, 2013 at 2:30 pm

Hello,
This stuff is some very easy things to do, yet so many people don’t use them or take advantage of them. The stock market usually always goes up over time, and everybody needs real estate. Those are the two markets I would try to invest the most in. Thanks for giving these tips,
Andrew
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