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11 Tips for Smart Investing During a Recession

Summary: In this article, learn 11 tips for smart investing during a recession. Also learn if you should invest during a recession, which industries can offer the best investments right now and how to keep your money safe.

COVID Economy

As COVID-19 continues to alter our daily life, putting our families, friends and neighbors out of jobs, and even in hospitals, many of us are wondering what’s going to happen to our economy?

Will there be a recession? 

The answer is a resounding yes, there most definitely will be a recession. So how can we as investors make the most of it? Is now a good time to invest when the market is low and values are cheaper? Should I pull my money from the stock market altogether or wait it out until the economy recovers? Is there such a thing as a safe investment during a recession? Should I be investing in other industries? If so, where? 

In this article we’ll answer these questions and more…

What is a Recession?

recession is when the economy experiences a rapid decrease lasting at least six months or two consecutive quarters. There are a number of factors that can cause a recession. In 2020, we’re experiencing an economic downturn caused by the COVID-19 pandemic. In which case we’re seeing all five indicators that our economy is headed toward a recession. Employment, personal income, manufacturing/industrial production, wholesale/retail sales and GDP have all been impacted by the spread of the Coronavirus.

Should You Invest During a Recession?

Did you know that the U.S. has had 33 recessions since 1854? And the frequency of these recessions has been every five years or so. We’ve been through this before and we can count on going through it again…and again. But even under the clouds of a looming recession, there are silver linings. You just have to know what to look for. 

Believe it or not, there is such a thing as smart investments during a recession, even as we’re in the thick of the Coronavirus pandemic. We know this because history continues to teach us that. Those that are willing to approach recessions as opportunities can end up winning in the end.

Best Industries to Invest in During a Recession

Certain industries are more recession-proof than others. The following are the best industries to invest in during a recession.

Discount Retailers

Businesses in the discount retail industry tend to benefit when the economy declines as consumers pull back on their spending and look for deals. Costco and Sam’s Club offer necessities at a discount and even non-bargain hunters are looking for a good deal, especially when money may be tight and the economy is bad.

Consumer Staples

Entertainment, clothing and other non-essential items in this business sector get hit harder when the economy drops. Whereas industries that provide essential consumer staples, like toilet paper, cleaning supplies, personal hygiene products, food, etc., often perform better during recessions. We’ve already seen this happening thanks to the pandemic of 2020. 

Kroger, Dollar Store, and Home Depot are all great examples of businesses that will continue to boom during times of recession. Fast food and food delivery services have maintained steady business during the COVID-19 crisis and typically do so in recessions as people opt for cheaper food.

Health Care

The healthcare industry as a whole historically performs well during recessionary periods. While the recession we’re heading into now is a unique one because it’s being caused by a global pandemic, the healthcare industry is as strong as ever. Also, our aging population and demand for medical attention fortify this industry even more.


Even during tough times, utilities such as electricity continue to be an essential cost. Now more than ever people need to keep the lights on and stay connected. Keep in mind that utilities are more of a defensive investment as the market just chugs along slowly, but steadily.

Service & Repair Companies

Services like restaurants, bars and maids often take a dip during an economic downturn as consumers tend to give up these luxuries first. However, service and repair industries actually thrive during recessions because businesses and households are tightening their belts and choose to fix things rather than buying new. During COVID-19, service and repair companies have been deemed “essential” business.

“Sin” Industries

Recessions can cause some hard times for a lot of people, businesses and industries. On the other hand, those in “sin” industries (not my words) like alcohol, tobacco, marijuana and even chocolate(!) actually prosper during economic downturns. This is likely because emotions and stressors are high when the economy and market are low causing consumers to seek relief through other means.

“Static” Industries

The term static means unchanging, stable or steady. So these static industries are those that remain unchanged or unaffected by how well the economy is doing. This includes sectors such as funeral services and health care.

Real Estate

What we’ve seen in past recessions was that qualifying for a mortgage loan was a lot harder to do. Many suffered from job losses or bankruptcy and were forced to rent. Over the last few years there’s already been a shortage of affordable housing. In fact, in certain markets within RealWealth’s network, rental applications for single-family homes actually went up last month. 

COVID-19 has caused stay-at-home and social distancing orders to be enforced across the nation. Because of so many uncertainties about how long this pandemic could last, people are looking for more desirable homes to “shelter in place” for the foreseeable future.

11 Tips For What to Invest in During a Recession

When the economy is in a recession, the assets that get hit the hardest are highly-leveraged (a lot of debt), cyclical, and speculative. Investments in these types of companies can be risky because there’s always a chance they’ll go bankrupt. They come with the most risk during recessionary times. 

Only invest in companies that have low debt, steady cash flow and solid balance sheets. Counter-cyclical stocks tend to do well during down economic times and appreciate regardless of downturns.

Tip #1: Gold is Good (so is Silver)

Gold and silver are both excellent assets to have during a recession because they don’t lose value based on the stock market. However, because these types of commodities do well when the market is down, prices usually go up. While gold and silver won’t lose value during a recession, it may be hard to buy a bunch if prices are high.

Tip #2: Invest in Real Estate During a Recession

During a recession, home values decline in certain markets, mortgage interest rates are usually low, and there’s steady rental demand but with very little competition from other investors/buyers. 

Like gold and silver, real estate is a physical asset. And buying when the market dips to take advantage of low prices and interest rates can be a really smart investment during a recession. If you currently own one or more properties, they may have lost some value. But that doesn’t mean you won’t ever get that money back–like the stock market. Real estate markets and values will come back up as the economy recovers and it’s one of the best long-term investments, even during a recession.

Section 8 landlords are likely feeling somewhat stress free regarding their rental properties during the COVID-19 pandemic. That’s because they own low income housing. Whatever portion of the rent a Section 8 tenant can’t pay, the federal government will cover. So Section 8 property owners don’t have to worry about their mortgage getting paid. Another great investment during a recession.

Tip #3: Keep the Recession Proof Stocks You Have

Have you ever heard someone use the phrase, FOMO? It’s an acronym for, Fear Of Missing Out. How about the acronym, FOLM? Probably not because I just made it up. Fear Of Losing Money goes way up when the economy tanks, and rightfully so. 

But selling all your stocks during a recession is actually the worst time to sell. You’ll almost certainly lose money if your approach to the stock market is near-sighted. If there’s one thing we can count on when it comes to the stock market and thus, the economy, is that it fluctuates.

Newton’s third law of motion says it best, “what goes up, must come down” and vice versa. The same applies to the market. A booming market is always followed by some sort of recession. Those that keep their money in historically strong stocks or buy when the market is low, come out on top every time. 

I’m not suggesting keeping all of your stocks during a recession. Keep the good ones, dump the rest, invest elsewhere and don’t let yourself lose sleep over FOLM.

Tip #4: Buy Recession Proof Stocks

Stocks have increased in value over time–historically 7% per year. This includes dividends and adjusted for inflation. Buying stocks during a recession actually gives investors the opportunity to double their investment. Sounds like a no-brainer, right? That’s because it is! BUT, in order to get these returns investors must hold onto the stock long-term, around 20 years. 

So why are people so afraid or unwilling to invest in the stock market during a bear market? A lot of it has to do with a short-term mindset. For instance, I’ve already lost money and I’ll keep losing more so I’m selling my stocks and getting out while I can. 

Where people miss out during a recession, is when they let emotions take over amidst uncertainty and go into survival mode. Rather than keeping a long-term investing mindset and sticking to that strategy, regardless of market fluctuations. RIDE IT OUT

There are also mutual funds and index funds that are more recession-resistant than others, especially right now. Just make sure they’re high quality stocks during a recession.

Tip #5: Earn Money During a Recession with Dividend Stocks

With a stock market that’s declining there are fewer options for investors looking to earn income as interest rates drop too. However, dividend stocks have historically performed well during recessions. Your main risk with this stock is if there are dividend cuts. You can lower that risk by buying stocks that produce positive, stable cash flow and low debt levels.

Tip #6: Lower Your Risk with U.S Treasury Bonds

U.S. Treasury Bonds, Bills or Notes are fully backed by the government and are attractive during economic downturns because they’re safe. You can invest in the U.S. dollar by buying treasuries and stay less impacted by the performance of the stock market.  Federally backed bonds can also include mortgage loans (FHA). Another good defensive and low-risk investment during a recession.

Tip #7: Keep the Lights On! Buy Utilities

Investing in utility stocks is almost risk-free. Just like we touched on in the industry section, utilities aren’t going to produce significant returns. But, their advantage is that they are defensive. There will always be a demand for electricity, even more so now with our reliance on  the Internet and technology to keep our businesses up and running from afar. Slow and steady wins the race with utilities, making it a great stock to buy during a recession.

Tip #8: Honor Your Elders–Invest in Health Care / Senior Living

The results from the 2020 Census haven’t been released yet, but it’s estimated that Baby Boomers are the second-largest population (second only to their children, Millennials) in the U.S. Why is that significant? As a huge amount of the population, around 73 million, are entering or well into their later years, the demand for health care and caregiver services is going to go through the roof. Senior living and health services will only continue to expand and grow, which is why it’s a great time to honor your elders and invest in them.

Tip #9: Hit Your 401k Contribution Limit

Should you keep contributing to your 401k account during a recession or use the money elsewhere? The short answer is, don’t stop contributing! “When the stock market is down is the best time to invest in your 401k,” according to financial expert Charlotte Geletka of Silver Penny Financial. It’s smart to consider increasing your contribution amount because your investment can go further when stocks are down. It’s a long-term investment strategy that works well during recessions.

Tip #10: Protect Your Portfolio / Diversify

In a perfect world, you would have a highly diverse investment portfolio before a recession hits. Hopefully, you already live in that world and are prepared to take on the next recession, with minimal stress. However, if you’re not living in that world and are worried about some of your investments, there are ways to reduce your risk. Find defensive, recession-resistant investments (like the ones above) to lower your risk and keep your money safe.

Tip #11: Be Cash Heavy–For Now…

Not only does cash provide flexibility, it comes with peace of mind. During a down market, cash is practically risk-free. Keeping cash in a money market or savings account won’t earn much interest, but it’s a great short-term solution to stay defensive during a recession. 

Remember, this is not a mid to long term strategy. When the economy starts to recover you’ll want to reinvest that money. Inflation will eat away at your money’s buying power the longer it sits in a low interest savings account.


Now that you know what smart investing during a recession should look like, start putting these tips to use! And if you think you need to minimize your risk, reevaluate your portfolio and come up with a plan to diversify your assets and protect yourself. Recessions can be times of extreme difficulty, but for prepared and smart investors, it can present opportunities.

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