Finder makes money from featured partners, but editorial opinions are our own.

What should you invest in during a recession?

Is there such a thing as recession proof stocks? Find out which investments are likely to continue to perform while there's a recession.

There is no such thing as a recession-proof investment, but there are definitely industries, stocks and strategies that tend to perform better in down periods.

The stock market is sensitive to fluctuations in people’s spending, as you’re likely to have noticed with the recent coronavirus outbreak and previous economic downturns. Some stocks can take a dive, but there are other investments considered to be “safe havens” that people usually turn to during a recession.

Here’s what to invest in during a recession, as well as some strategies for investing during economic downturns.

Best for Beginners

Go to site
Free trades for young investors
  • Easy-to-use platform
  • Low fees
  • Student and young investor discounts

Best for Lowest Commissions

Go to site
Low margin rates
  • Access to international stock exchanges
  • Low margin rates
  • Powerful research tools

Best for Easy-to-use App

Go to site
Low commissions
  • $50 in free trades
  • Low commissions
  • Easy-to-use app

Did you know?

A “safe haven” investment is typically stable in times of market volatility and is also useful for investors looking to diversify their portfolio, decreasing exposure to riskier assets or investments. However, this doesn’t make the investment risk-free and as with all investing, you could still lose your capital.

Defensive stocks

Defensive stocks, also known as consumer staples stocks, include companies that produce goods that the public will still buy them even when financial times are tough or uncertain. People will aways need these staples. Even when we’re all counting our pennies, we’re still spending money (albeit, less money) on things like healthcare, food and utilities. These are the sectors that are more likely to do well while other sectors struggle. You can invest in these stocks through any trading platform.

Compare stock trading platforms to buy defensive stocks

1 - 4 of 4
Name Product Finder Rating Available Asset Types Stock Trading Fee Account Fee Signup Offer Table description
Interactive Brokers
Finder Score:
★★★★★
4.3 / 5
Stocks, Bonds, Options, ETFs, Currencies, Futures
min $1.00, max 0.5%
$0
N/A
Winner for Best Overall Broker in the Finder Stock Trading Platform Awards.
CIBC Investor's Edge
Finder Score:
★★★★★
3.8 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs
$6.95
$0 if conditions met, or $100
100 free trades + up to $4,500 cash back
An easy-to-use platform with access to a variety of tools to help you trade with confidence.
Questrade
Finder Score:
★★★★★
4.3 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95 - $9.95
$0
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio to take out some of the guesswork.
Qtrade Direct Investing
Finder Score:
★★★★★
3.7 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$0 if conditions met, otherwise $25/quarter
Get up to a $150 sign-up bonus. Use code OFFER2024. Ends October 31, 2024.
Low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options.
loading

Property

If you’re already a homeowner, a recession doesn’t do you many favours. However, it can offer some investment opportunities if you can purchase while home values are down.

You don’t have to purchase a home to invest in property. You can invest in property investment funds, invest through peer to peer lending, invest with property ISAs or with land banking schemes. We have a handy guide to investing in property without actually buying property.

Precious metals

This is another product you can invest in without actually purchasing any physical goods. Precious metals such as gold and silver tend to continue to perform while there’s a recession. You’re likely to see the prices rise during this time as the demand for them rises, so you need to snap up a good price early on.

Some currencies

Not all currencies are considered safe havens. It generally depends on the government and the stability of their financial system. For example, the Swiss franc is generally thought to be a safe haven because of the stability of the Swiss government. The euro, US dollar and Japanese yen are also thought to be safe havens.

Foreign exchange (usually known as forex) is the market where currencies are traded, with profits and losses made on the changing exchange rate. Think about when you buy holiday cash, then imagine you sell it back a day later when there’s a different rate. That’s basically forex.

Best stocks to buy during inflation

Tips for investing in a recession

  • Play the long game. The most successful investors don’t let times of economic downturn trip them up. They stay invested, even when their portfolio is down due to market volatility because they know that the market always bounces back. (Of course, that’s not to say all individual stocks bounce back, which is why picking your investments wisely during this time is important.)
  • Don’t invest money you need in the short term. If you think you’re going to need your money soon, it’s not wise to invest it in stocks that are going to be unstable to start with. This could lead to you needing the money before the market bounces back, so you’ll have to realize any potential losses.
  • Stick to large-cap stocks. Large-cap stocks (which usually have valuations worth billions of dollars) are usually more stable and less vulnerable to market fluctuations and volatility.
  • Leverage ETFs. ETFs expose you to the market with less risk than stocks do. They automatically diversify your portfolio and spread out your risk. Look at the most resilient sectors and choose an ETF that exposes you to multiple companies in this sector. It’s easier to do well investing in an index that tracks a sector than it is picking specific stocks. For example, if you want to invest only in consumer staples companies, you could buy Vanguard’s Consumer Staples ETF.
  • Look for dividend stocks. Even in times of economic downturn, you will still be paid your dividend. Look at consistency of the dividend paid out, not necessarily yield, as higher yields can have higher risks associated.
  • Eliminate debt and have money saved up for emergencies. You can make additional savings for investing this way, to ensure that you’re not going to need to withdraw if your boiler fails or car breaks down.
  • Avoid the high-risk stocks. Stay a bit cautious when investing during a recession as stocks tend to be a bit more tumultuous. Some industries like tech and non-essentials tend to not perform well during recessions.

The lowdown

There’s not really such a thing as a “recession-proof investment”. Investments are risky. The closest you’ll get to “recession-proof” is safe havens. Save havens tend to be more stable while markets are volatile. Examples of safe havens include:

  • Defensive stocks: healthcare, food and utilities
  • Property
  • Precious metals
  • Some currencies

Guide to investing for the future

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.

More on investing

More guides on Finder

  • Market Uncertainty: Keep Your Retirement Savings on Track

    Persistent inflation and uncertain economic conditions can prompt fear. Answer six questions to know when to protect your retirement savings.

  • Long term investments

    Find out how long term investments work and how to use long term investments to build your wealth.

  • Masterworks review

    An investment platform that enables users to buy and sell stocks in fine art securities.

  • ETF vs. mutual fund

    ETFs and mutual funds both hold baskets of investments, but pricing minimums and trading costs vary.

  • Friedberg Direct in Canada

    Learn how you can trade currency pairs and contracts for difference with this reputable online forex trading platform.

  • AvaTrade review

    Pay no commission when you start trading CFDs and forex with this reputable online trading platform.

  • Fusion Markets review

    Learn how you can make the most out of your forex trades with this low-fee forex trading broker. 

  • How to invest in oil in Canada

    We walk through how to invest in oil through stocks, futures, exchange traded funds and master limited partnerships, plus some of the risks you face.

  • What are bonds?

    Bonds are fixed-income assets that earn interest. But bonds may underperform other asset classes in the long run.

Ask a Question

You must be logged in to post a comment.

Go to site