The 6 Investments Everyone Should Make During an Economic Downturn (2024)

With inflation high and the market flailing, it can be challenging to figure out the best things to do with your money.

“During economic downturns, it can be tempting to sell off your investment and keep cash reserves — but this is rarely a good idea,” said Thomas Kralow, a self-made millionaire and founder of University Grade Trading Education. “Holding cash loses you money as inflation eats away at your savings by the day.”

The smart move is to stay invested, Kralow said.

“Instead of trying to time the market, stick to a long-term investment plan that aligns with your risk tolerance, goals and timeline, and never stop exploring your options,” he said. “If this strategy works for the world’s most successful investment firms, why wouldn’t it work for you?”

As for where to invest your money during an economic downturn, Kralow recommends focusing on these six assets.

Consumer Staples Stocks

Consumer staple stocks are investments in direct-to-consumer companies that sell essential goods such as food, drinks, and household and personal care products.

“The logic here is simple: they are always in demand,” Kralow said. “Even in an economic downturn, people won’t stop buying the essentials, so the companies selling them are far less likely to see revenue fall.

“Additionally, publicly-traded companies that sell consumer staples are often well-known legacy businesses with a long history of success,” he continued. “They have a sizable share of the market, limited competition among companies of their stature and steady prices — which is important during a recession when consumers are most sensitive to price changes.”

Kralow particularly recommends Coca-Cola, L’Oreal and Walmart. “They’re big brands that have been around for decades and have comfortably survived everything the economy has thrown at them so far,” he said.

Precious Metals

Gold and silver are typically resilient during market downturns, Kralow said.

“Precious metals are often considered a smart investment, since the decades worth of data we have available shows they tend to hold or increase the value, even in times of economic uncertainty,” he said. “This is largely because they aren’t tied to the financial stability of a particular currency or country, which allows investors to hedge against inflation when times get tough. Plus, precious metals are rare and difficult to mine. We can’t simply turn the printers on and create more like we do with money when supply falls short. Subsequently, as more people buy and hold, scarcity grows and their value tends to increase over time.”

There are a number of ways you can invest in precious metals.

“Buying physical metals in the form of bars or coins is an option, of course, but then you have the issue of storing, insuring and keeping them safe, which comes at a cost,” Kralow said. “Instead, you can buy exchange-traded funds (ETFs), which allow investors to add precious metals to their portfolio without having to physically purchase, store and resell them.

“Mining stocks are another alternative,” he continued. “While some ETFs directly track the price of the underlying metal, mining stocks allow you to invest directly in the companies engaged in the exploration, development and production of precious metals. Then there are mutual funds that allow multiple investors to pool their money together and invest in a variety of precious metals securities, including stocks and ETFs. These funds are typically expert-led and offer access to investment opportunities that are typically unavailable to individuals.”

Healthcare Sector Stocks

“Just like consumer staple products there are also staple services that we simply can’t survive without, and healthcare is among the most essential,” Kralow said. “People require medical attention, medicines and services regardless of the state the economy is in.”

Many stocks in this sector got a boost due to the COVID-19 pandemic.

“The COVID crisis has made healthcare innovation an even greater priority globally and, subsequently, healthcare stocks look to be a safe, long-term bet,” Kralow said. “Moderna — the company behind the well-known vaccine — was priced at $22 per share in 2019. Today, it sits at around $140. Other examples include Pfizer, Johnson & Johnson and AstraZeneca. However, never forget the story of Theranos, and never blindly follow the buzz. Always do your research and rely solely on hard evidence of a company’s success.”

Government Bonds

Bonds are very low-risk investments.

“Backed by the government, bonds provide a steady return that offsets the volatility of equity prices,” Kralow said. “Given the minimal risk, bonds tend to outperform other investment types in a downturn. Not only do they provide a relatively safe investment, but also a steady income stream in the form of regular interest payments. They’re also highly liquid, meaning they can be bought and sold in the market quickly and easily.”

However, there are a few things to be mindful of.

“While government bonds provide a steady income stream, they generally offer lower returns than other types of investments,” Kralow said. “Interest rates paid by government bonds may not keep pace with inflation, especially at the moment, and their value fluctuates based on changes in interest rates. When interest rates rise, the value of existing bonds may decline.”

Crypto

Crypto is a “high-risk, high-reward investment” that Kralow recommends having as part of your portfolio.

“They’re similar to precious metals in the sense that they’re not controlled by any one government or central authority, which can make them less vulnerable to economic turbulence,” he said. “Likewise, their supply is limited and, as we know, scarcity is an excellent driver of value.”

However, because crypto is volatile, don’t invest everything into this one asset. It’s also important to be strategic about which cryptocurrencies you invest in.

“Considering the ongoing crypto winter and recession risk, the bear market could still be an issue during 2023,” he said. “The safest way to invest in such a volatile market is to choose blue chips such as Bitcoin and Ethereum, as low-cap altcoins are at greater risk of financial collapse. We’ve seen the values crypto can reach, so the bear market is the perfect time to buy low. In the long run, when a new growth cycle starts, these investments should provide the largest rewards.”

Yourself

Investing in yourself will always pay off.

“The knowledge and experience that you have will stay with you for the rest of your life, helping you to thrive no matter the market circ*mstances,” Kralow said. “Investing in courses, mentorship and networking will help you avoid costly mistakes and open up new opportunities for you. In the long run, this investment will help you to minimize your losses and increase your profits.”

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