How should you invest during a recession

Vineet Golani


How should you invest during a recession? We explain the best ways to overcome the difficult times

What is a Recession and how does it take place?

A Recession is a situation where business and investment plans fail to show any growth prospects, thereby leading to drop in GDP in addition to rising unemployment rates.

There are several factors such as psychological, economical and financial ones which play a significant role in causing recessions.

A similar scenario to recession took place when the covid-19 pandemic outbroke, leaving the economy vulnerable and weak.

One of the best practises would be to invest in companies that have lower overheads, present a strong balance sheet and are practically debt free.

We brief you on how to face a recession in the best manner possible.

Focus on Gold investments

Gold and silver both are amazing metals to invest in during a recession as they do not lose value depending on the stock market. They do not lose significant value during the ups and downs and are not as volatile. Moreover gold is very liquid and can be sold off quickly shall the need arise.

Invest in reliable dividend stocks

Dividend is the amount that a company repays to its shareholders out of its profit reserves. It is a form of a reward paid to the customer for staying invested in the company for a long period of time.

Investing in stocks that have a great track record for their dividend payment history will prove to be very beneficial in the long run. Most companies pay an interim dividend as well as final dividend which translates to you getting paid by the company twice a year.

That's not all, if you stay invested in that stock for a long time, you will benefit from stock appreciation as well.

Invest in Real Estate

Real Estate investment during recession period is beneficial as during recession period, there is a drop in brokerage, home rates reduce and there is a decrease in the mortgage rates too.

Real estate tends to take a big dip during recession periods and hence entering into the Estate market at such a time could be of great advantage to the buyer. This will enable the buyer to hedge against the threat of recession.

Prices of Real Estate will eventually start getting back on track once the economy recovers and hence the investor will benefit with a good profit.

Look out for Recession-proof stocks

People fear during a recession are bearish on the market and fear that they will have to bid goodbye to all their hard invested money. They let their emotions take over by seeing the short term impact of a recession, while neglecting long term gains in the form of opportunities.

Some recession proof stocks belonging to sectors such as: healthcare, utilities, IT, service and repair are amongst the best to bid on during a crisis.

Buying and staying invested in stocks during a recession time will enable the investor to double their investment. Investment during a bear market provides the best opportunity to make the most out of the stocks as at that period of time most of them are available at a discount price.

There are several safe mutual funds that one can invest too as an added investment avenue during such times. Bonds become a low risk proposition during such times.

Keep your pocket heavy

Yes, you read it right! Having a good cash reserve during a time like recession will ensure that you have good liquidity. Cash is flexible and the most convenient way of transaction. When the market is down, holding onto cash as cash is risk free.

Hence it is always important to strategize your moves during an ongoing recession period to keep yourself and your investments safe from any kind of risk and uncertainties.

Recession although poses a lot of threats, it can be seen as an opportunity for smart investors and hence we advise you to make full use of these tips to benefit from such times too!