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What Are The Safest Assets To Invest In During A Recession? Experts Explain

Jenna Gleespen - June 02, 2022

What Are The Safest Assets To Invest In During A Recession

Fears of a recession are looming in many investors’ minds, leaving many wondering What are the safest assets to invest in during a recession? We spoke to some experts within the finance industry to get their take!

Dividend Stocks are One Way to Go

 Max Whiteside from Breaking Muscle says: 

What Are The Safest Assets To Invest In During A Recession

Add some dividend stocks to your portfolio if you want a less volatile portfolio. Because high-quality dividend stocks fluctuate less than other types of stocks (for example, growth stocks), your portfolio will move less. Plus, they can provide a cash dividend, ensuring that you have some money as you wait for the market to turn around.

If you don’t feel experienced picking your own dividend stocks, invest in a dividend stock fund and benefit from the lower risk that comes with diversification while still receiving a high dividend yield. You’ll also get a larger total yield if you buy when stock prices are low.”

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Cash is Key

Gerrid Smith from  Joy Organics explains: 

What Are The Safest Assets To Invest In During A Recession

“Cash can be a good short-term investment because recessions usually don’t last too long. You have a lot of options with cash. You can spend it if you need to, such as if you lose your work during a recession, and you can use it to make an opportunistic investment if the stock market drops quickly or if you find the ideal house later.

However, having too much cash has its drawbacks. Inflation can deplete your savings, and you’re unlikely to earn enough interest to compensate. So, put your money in an online savings account with a high-interest rate and keep it for strategic reasons.”

Gold and Precious Metals Can be Promising

Hannah Dworkin from USScrapYard tells us:

What Are The Safest Assets To Invest In During A Recession
“There are a handful of asset groups that often hold or even expand in value against the trend while the market is down. As difficult as it is to predict what will happen in the future, there are a few assets that have historically fared well in times of crisis and appear to be in the lead among peers. After the outbreak and the company’s downfall, my only option was to rely on my gold investment.

One of my favorite pastimes is purchasing expensive jewelry and precious metals like gold and silver. It salvaged my entrepreneurial career. A strong preference for gold jewelry as a young woman was a huge asset in my professional endeavors, which I learned the hard way. Gold is often regarded as a safe haven asset, similar to bonds in this respect.

Why? Because it is a marketable asset that can be purchased and sold all over the world. A business owner’s empire must contain assets like cash and stock, in my opinion, if it is to be protected against future economic downturns.”

James Rehm, Chief Operating Officer at Skuuudle, explains:

what are the safest assets to invest in during a recession

“I have observed during market downturns, precious metals such as gold and silver tend to do well. However, because demand for certain goods tends to rise during times of recession, their prices tend to rise as well. There are several ways to invest in precious metals. Purchasing bars or coins from a vendor or coin dealer is the easiest option. While this is not the same as purchasing security, it is theoretically equivalent to any other choice.

If you want to invest in precious metals, look into exchange-traded funds (ETFs). These funds are pools of money invested in a particular industry, in this instance the precious metals market. If you’re saving for retirement, you might also invest in a gold IRA.

ETFs May be a Good Option

Sam Boughedda, a senior analyst and news editor at AskTraders.com, says: 

“When the economy is on shaky ground, some sectors will still be able to provide a steady return for investors. My preferred investments during a market downturn are high-quality dividend stocks and ETFs. High-quality dividend stocks are preferred over growth stocks as they are usually less volatile and offer a solid return, via a cash dividend, during times of market upheaval.

ETFs of mutual funds can also be suitable investments during a recession. They are also less prone to volatility and allow you to invest in the market as a whole, rather than individual stocks that may be susceptible to the current market conditions. 

There are, of course, other potentially solid asset classes to invest in during a downturn, such as gold and bonds, but overall, investors should focus on the long-term, and have a plan in place, ideally before a recession begins, and sensibly manage any potential risk to their portfolio”

Some Suggest Bond Funds

 Sumit Bansal, founder and CEO of TrumpExcel, says: 

What Are The Safest Assets To Invest In During A Recession

“I would like to say that municipal bond funds are next on the list. These investments, issued by state and local governments, leverage local taxing authority to provide investors with a high level of safety and security. They carry a greater risk than funds that invest in government-backed securities but are still regarded as relatively safe.

Additionally, taxable bond funds issued by corporations should be considered. They offer higher yields than government-backed securities but carry a notably greater degree of risk. Selecting a mutual fund that invests in high-quality bond issues will reduce your risk. Even though corporate bond funds are riskier than government-only bond funds, they are still less risky than stock funds.”

Look for Industries With Good Growth

Elliot Ledley, Director of Media Relations CASPIAN STUDIOS says:

“During an economic downturn, you might be tempted to sell all of your investments, but experts advise against doing so. When the overall economy is fragile, there are usually a few industries that continue to grow and give investors consistent returns. I suggest considering engaging in the utilities, health services, and consumer goods sectors if you wish to protect yourself in part with equities during a recession.

Regardless of their economic health, people will continue to spend money on medical care, home products, power, and food. As a consequence, these stocks tend to outperform during downturns and underperform during upturns.”

Final Words: What are the Safest Assets to Invest in During a Recession?

There are plenty of various asset classes to consider investing in during a recession. While there are many options out there, gold, dividend stocks, and bonds are just a few of the most popular choices. Remember, before making any significant investment, it is always best to speak with a qualified professional for financial guidance. 

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Jenna Gleespen is a copywriter specializing in finance and investment finance. Originally from the United States, she now calls London, England home.