The next downturn is on the way. It’s been 10 years since the Great Recession ended in June 2009. It was a long and slow recovery for many years, but the last few saw fast growth numbers in the North American economy and, at least until December 2018, strong growth on American stock exchanges.
Since 1980, recessions have come around about once a decade, so many are holding their breaths and waiting for the next shoe to drop. Contraction is an ordinary part of the economy and it’s something everyone expects – so how do you get out from under and put yourself in a better position to react to it?
You need to know where you can put your money during a recession to protect your savings and even grow them.
#1 Invest in Core Sectors
You don’t have to abandon equities altogether in a recession. Core sectors are industries that always have a place. Values may not skyrocket during a recession, but they will weather the storm and they can provide dividends. Look into core sectors such as utilities, healthcare, and consumer goods.
#2 Stick to Cash
During the last major recession, safe haven currencies such as the US Dollar and Japanese Yen were highly sought after. According to Wall Street, there’s more to cash investments than money in your bank account. Cash can include short-term treasuries, while keeping funds in money markets will continue to produce returns and rapidly be converted back into spending money. If you can even get a 2% yield out of short-term investments, it’s a lot better than a 10% loss in the stock market.
Saving some cash is always a good way to prepare for a recession. Before investing, you should have enough cash on hand to prepare for the risk of job loss.
#3 Buy Cheap Assets
One successful strategy is using that cash for the liquidity you need to pick up cheap assets in the worst of the recession. Stocks, real estate, even businesses will be at bargain prices during the trough.
Make no mistake, it takes an iron will to buy when times are tough. You likely won’t be able to predict the absolute bottom, so you could watch your portfolio continue to tumble before the recovery. You can mitigate the risk using a dollar cost averaging strategy, which involves investing fixed capital over a period of time to balance both costs and losses.
#4 Buy Gold
Gold is another great safe haven for your wealth. Gold has a history of beating inflation, so it’s also a safe bet if you want to park your money in gold over the longer-term. Gold bullion is the soundest way to invest in gold, as it minimizes third-party risks. Look for gold coins and gold bars and buy your gold online from a trusted source that offers insured storage.
#5 Invest in New Skills
If you’re laid-off during a recession, it might be a good time to invest in yourself. New knowledge and skills can put you back on the job market in a stronger position than before. If you have the funds to go back to school, it could be a better use of your time than going nowhere in a tough job market.
There are places you can put your money to survive the next recession. Be prepared as the economy shifts around you.