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How to Invest

During a Recession


While it’s premature to declare the United States is in a full-blown recession, many say the writing’s on the wall. Should the US economy spiral into a recession, what are some things you can do to continue investing your money? Let’s take a look at some key strategies to keep in mind for your investments.

Invest in Essentials

There are many companies that sell and produce certain essential products, such as electricity and food, as well as certain household products, such as toilet paper and other necessary staples. If you take the time to invest in utility stocks or consumer staples, you’ll have your money invested in stocks that won’t be hit quite as hard during a recession. The reason for this is that everyone needs electricity, food, and toilet paper, so these stocks will not ebb and flow as much as the rest of the market. Cash is one of your best bets as well, so look into keeping a portion of your portfolio in cash or securities that are highly liquid. Money market mutual funds are perfect for this type of investment.

Be Smart, Buy Quality

One of the smartest things you can do when the economy takes a turn is continue to invest a fixed amount no matter what the market is doing. If you have committed to something small, perhaps $10 a week, stick to it, and don’t get discouraged. These tiny investments will grow over time, and that is the goal when building generational wealth.

You’ll also want to purchase quality investments, which are marked by low leverage, low beta, and high return. Look for companies with recurring high revenue—subscription-based business models are just such companies.

Be sure to avoid any growth stock during a recession. If your stocks are tied to a company that projects high growth, they will do much worse than stocks that pay dividends or investments that produce income.

Other Options

Consider dividend stocks. Even should the stock price of the company fall, it might continue to pay dividends. This will give your portfolio the cushion it needs through hard economic times. 

Another option is an actively managed fund. These funds outperform others by 4.5% to 6.1% each year within a recession—after certain adjustments are made for both expenses and risks.

Bonds are another attractive choice, as they also do well during an economic downturn. However, it is best to stick to investment-grade bonds to avoid rising defaults. 

Always Invest No Matter What

The best way to invest during a recession is to continue to do what you’ve been doing. No one can know the duration or the impact of a deflated economy, so it’s best to continue plodding on. A recession is not ideal for growing wealth, however the market overall continues to look forward as the years go on. Do not be swayed from investing due to a hiccup in the economy, rather, look toward building your future and continue to invest accordingly. 

To learn more about investing, closing the racial wealth gap, and growing generational wealth for Black and brown families, please visit Financial Joy School and become a part of our financial family.


Author FJS

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