All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
What should you invest in during a recession?
Find out which investments are likely to continue to perform while there's a recession.
Updated
What's in this guide?
When the stock market is as volatile as it is at the moment, it’s no surprise that everyone’s gone mad for share trading. But should you invest during a recession, and if so, what should you invest in?
The stock market is sensitive to fluctuations in people’s spending, as you’re likely to have noticed with the recent coronavirus outbreak. Some stocks can take a dive, but there are other investments considered to be “safe havens” that people usually turn to during a recession.
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.
Healthcare, food and utilities
These are known as “defensive stocks”, which basically means that consumers will still buy them.
When investing during a recession, you mainly want to think about what stocks and shares are still likely to do well. Even when we’re all skint, we’re still spending money (albeit, less money) on healthcare, food and utilities. These are the sectors that are more likely to do well while other sectors are struggling. You can invest in stocks and shares through a trading platform. If you go with a platform that allows you to build your own portfolio, you can choose which companies you want to invest in.
Compare share trading platforms
Property
If you’re already a homeowner, a recession doesn’t do you many favours. However, it can offer some investment opportunities if you 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.
Tips for investing in a recession
- Think about the long term. If you think you’re going to need your money soon, it’s not really wise to invest it in stocks that are going to be unstable to start with.
- 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.
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:
- Healthcare, food and utilities
- Property
- Precious metals
- Some currencies
This article offers information about investing and the stock market, but is not personal investing advice. The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please get professional advice, for example from a financial adviser.
More guides on Finder
-
Invest in makeup stocks
Want to add highlight to the foundations of your investment portfolio with makeup stocks? Find out how to invest in makeup and the risks.
-
How to invest in a volatile market: 3 strategies
Find out what you need to consider when investing in a volatile market and 3 popular strategies for doing so. Paid content.
-
How to invest in a falling market
Find out 5 key ways to invest in a falling or “bear” market. Paid content.
-
Invest in Hang Seng
Find out what makes up the Hang Seng index. We’ve compiled the different ways that you can invest in Hang Seng, such as through ETFs.
-
Invest in FTSE 250
Find out how you can invest in the FTSE 250 with exchange traded funds (ETFs). See which 250 companies on the London Stock Exchange are in the FTSE 250.
-
How will the US election affect the stock market?
Rising coronavirus cases in Europe and the US has triggered a stock market slide. But what impact will the imminent US election have for shares?
-
The 10 best performing investment trusts over the past five years
We’ve put together a list of the best investment trusts of recent times, in terms of performance, income generation and popularity.
-
Value investing
Best exemplified by the Oracle of Omaha himself, Warren Buffett, value investing is an investing strategy that, you guessed it, tries to find value in the stock market.
-
Cloud stocks | Top cloud companies to invest in 2020
Cloud computing stocks have skyrocketed during 2020. In this article we look at the best performers, how to invest in them, and also take a quick look at cloud computing ETFs for you to invest in too.
-
Invest in silver ETFs
Find out what influences the price of silver, why silver does well when the stock markets are declining and how to invest in silver ETFs.
Ask an Expert