When most people think of recession, they think of it as a bad thing. But in reality, recessions can be good for investors. Why? Because during a recession, prices for stocks and other investments tend to go down. This allows investors to buy those assets at a lower price and sell them later when prices go back up.
Of course, timing is everything when it comes to investing. So, if you’re thinking about investing during a recession, here are some ways that Bill Schantz suggests you can invest your money in.
5 Ways to Invest Your Money During a Recession per Bill Schantz
Bill Schantz believes that one type of investment that can be particularly helpful during a recession is defensive stocks. These are stocks of companies that provide essential goods and services that people continue to need even when the economy is struggling. Examples of defensive stocks include utility companies, healthcare providers, and food producers.
Another type of stocks that can perform well during a recession is cyclical stocks. Cyclical stocks are those of companies whose businesses tend to do better when the economy is growing but worse when the economy is contracting. Because recessions are typically followed by periods of economic growth, cyclical stocks can be a good bet for investors who are patient enough to wait out the downturn.
According to Bill Schantz, dividend stocks can also be a good choice during a recession. These are stocks of companies that pay regular dividends to their shareholders. Dividend stocks tend to be less volatile than other types of stocks, which means they may not go down in value as much during a recession. And because you’re getting paid dividends even when the stock price is down, dividend stocks can provide some income stability during tough economic times.
Bonds are another investment that can offer stability during a recession. When you buy a bond, you’re essentially lending money to the bond issuer, typically a government or corporation. In exchange for your loan, the bond issuer agrees to pay you interest payments at regular intervals and then return your original
ETFs with Short Exposure
ETFs are a type of investment that allows you to buy a basket of assets in a single transaction. Some ETFs focus on specific sectors or regions, while others provide exposure to a variety of asset classes.
There are also ETFs that offer short exposure, which can be helpful during a recession. Short exposure is when an ETF bets against an asset by selling it short. This means that the ETF will make money if the price of the asset goes down. So if you think the stock market is going to decline during a recession, you could invest in an ETF with short exposure to offset some of your losses.
Investing during a recession can be a great way to get bargain prices on assets that are likely to rebound in value when the economy improves. But it’s important to do your research and be patient, as not all investments will perform well during a downturn. Bill Schantz wants you to remember to diversify your portfolio and not to put all your eggs in one basket.