Even in the midst of some of these market corrections we’ve experienced in the first half of 2018, the economy is still rocking and rolling. Unemployment is down, job growth is up, major stock indexes are at or near all-time highs, real estate is sizzling, and life is good. But if history teaches us anything, it’s that the good times don’t last forever.
Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital: Financial Products You Should Avoid?
Whether it’s this year, next year, or a decade from now, a recession will come. Will your portfolio be prepared?
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The first two months of the third quarter were the best months for D1 Capital Partners' public portfolio since inception, that's according to a copy of the firm's August update, which ValueWalk has been able to review. Q2 2020 hedge fund letters, conferences and more According to the update, D1's public portfolio returned 20.1% gross Read More
5 Investments to Protect Against a Recession
If recessions were easy to predict, they wouldn’t hurt nearly so bad. You would just brace yourself and wait things out. Unfortunately, there is no such predictability. That’s why it’s always important to be prepared by putting a portion of your portfolio into assets and investments that are (more or less) recession-proof.
- Rental Properties
“With the stock market, you could technically lose money when the economy dips, but middle-class rental properties don’t tend to be affected much by such developments,” One site points out. “Even in a down economy, people have to have a place to live! The value of your property might take a temporary hit, but the cash flow should stay about the same.”
While vacation properties or luxury real estate investments might take a hit, middle-class rental properties in highly populated areas will always have high demand. Adding a couple of properties to your portfolio can ensure you have some money coming in during slow periods.
Don’t want to get involved with directly owning real estate? You can still get your feet involved in this asset class by investing in real estate investment trusts – commonly known as REITs.
“They’re a way better option than going DIY, because the REIT does all the work—it buys the properties, fixes the broken elevators and collects the rent—and passes the cash on to you,” Brett Owens writes for Forbes.com. “Plus, REITs don’t pay federal income tax, so long as they payout 90% of their profits as dividends, which means high yields are common in this corner of the market.”
- Discount Retailers
People still spend money when the economy is down. But instead of buying from luxury brands and high-end department stores, they switch to discount retailers that sell quality products at low prices.
From an investing perspective, it’s wise to load up on discount retailers, such as Walmart. Recently, Walmart saw net income rise in 2008, 2009, and 2010 – which was the height of the recession. All signs indicate the company would do so again if another recession were to hit.
- Sin Industries
Putting your own convictions aside, you should realize that “sin” industries also do well during recessions. People are sad, frustrated, and depressed, so they turn to things like alcohol, tobacco, and adult entertainment as a way of forgetting what’s happening. Adding a few of these proven stocks to your portfolio can put you ahead.
There are certain goods and services that remain unaffected by recessions. For example, pharmaceutical companies still sell drugs, healthcare companies still provide services, tax companies still file returns, and waste disposal companies still pick up trash. You probably won’t get rich off of these companies during a recession, but you’ll at least increase your chances of beating market index funds.
Adding it All Up
You don’t necessarily want your entire portfolio in these investments. To do so would be to limit your ROI. However, it is smart to keep a portion of your investments in these assets so that you’re prepared (should the market take a downturn). If nothing else, this will provide peace of mind.