What should you invest in during a recession?

Find out which investments are likely to continue to perform while there's a recession.

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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 what should you invest in during a recession?

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

Table: sorted by promoted deals first
Data indicated here is updated regularly
Name Product Invest from Invest in
Hargreaves Lansdown
£100 or £25 a month
Over 2,500 funds
Capital at risk
Interactive Investor
£25 a month
Over 2,500 funds
Capital at risk
Legal & General
Legal & General
£100 or £20 a month
Over 50 funds
Capital at risk
Saxo Markets
£5
Over 3,000 ETFs
Capital at risk
AJ Bell
£500 or £25 a month
Over 2,000 funds
Fidelity
Fidelity
£50
Over 3,000 funds
Capital at risk
Moneyfarm
£1,500 (initial investment)
7 funds
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Compare up to 4 providers

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. Capital is at risk.

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.

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
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. Capital is at risk.

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