5 Tips to Make Your Investment Recession-Proof


 Photo by stevepb, CC0 1.0

In the wake of the Great Recession of ’08, many people have grown concerned about how to make safer investments and with good reason. If you want to keep your money safe in case of another downturn in the economy, take a look at these tips.

  1. Don’t Leave the Market

Though fear of a recession leads many people to consider leaving the market for good, that actually isn’t a very wise or safes strategy. That just means that you no longer have the chance of increasing your funds to keep up with inevitable inflation. Instead, you want to use the following strategies to invest your money safely so, no matter what happens, some of your funds are bound to stay safe and keep earning, setting you up for a healthy payoff down the road.

  1. Diversify Your Investments

Diversifying your investments just means dividing your assets between different kinds of investments.  You want to have funds in various forms: stocks, bonds, CDs, savings accounts, and more.

  • Stocks: stocks are shares in a particular company. They can offer a higher return on investment than most other options, but they are also riskier.  In times of recession, you may want to invest less in stocks because they expose you to more risk, but you shouldn’t give up on them entirely because they do have the potential to be such strong earners.  When choosing stocks to invest in, look for high quality and low expense.
  • Bonds: bonds are debt securities. Basically, by purchasing a bond you are lending money to the issuer, an agency, government, corporation, or similar, and in return they promise to pay you back with interest. They are less likely to fail than stocks, but as a tradeoff they also offer lower returns. You can purchase bonds safely from experts like Viking Bond Service.
  • CDs: CDs (certificates of deposit) are fixed-income investments with virtually no risk. They are basically a savings account that you put money in, but instead of taking funds out whenever you want, you agree to keep them in for a set period of time, usually between 6 months and five years. In general, the longer the term length, the higher the interest the bank will pay you on your CD.

Savings and retirement funds: Savings accounts and retirement funds are some of the most basic and traditional investments you can make. Though interest from these sources is usually fairly low, they are also some of your safest options for investing, so it is good to keep them in the mix.

  1. Invest in Safe Markets

Some markets are riskier than others. To prepare for the possibility of a recession, you want to invest in stable markets like staple investments or consider investing in markets abroad, which may not be as affected by a downturn in our national economy.

Staple investments: Even in times of recession, stock in businesses within staple fields are likely to stay fairly steady. These fields include food and beverage, household and personal items, and healthcare, along with a few others.

International markets: Investing in markets outside of the U.S. can divvy up your risk. The European market, for example, can be thriving even if the U.S. market hits a slump, or vice versa.

  1. Create an Emergency Fund

To make sure you have some funds available no matter what, you should have a back-up emergency fund.  Savings accounts are one good route, but I would also suggest creating an account insured by the FDIC (Federal Deposit Insurance Corporation). These are high-interest accounts but they are also quite liquid, so you can access the funds easily in case of an unexpected financial situation such as losing your job, totaling your car, or incurring hefty medical expenses.

  1. Pay Off Your Debt (And Avoid Acquiring More)

Having debt puts you in a riskier position from the start, so you soudl avoid it as much as possible when trying to prepare for a possible recession. When recessions do come along, the standards for loans, mortgages, credit cards, and the like all go up, so only people with excellent credit scores will be approved. Keep your credit under control by paying off debt immediately and not biting off more than you can chew.

Final Advice

All in all, keeping your assets safe in the face of a possible recession is all about staying calm, researching your options wisely, and not putting all of your eggs in one basket.  And if you start getting overwhelmed by your options, definitely consider consulting a professional to advise you on your investments.