{"id":773,"date":"2019-09-08T21:10:40","date_gmt":"2019-09-09T04:10:40","guid":{"rendered":"https:\/\/blogs.ubc.ca\/technut\/?p=773"},"modified":"2019-09-08T21:10:40","modified_gmt":"2019-09-09T04:10:40","slug":"which-investments-do-americas-wealthy-use-to-counteract-a-recession","status":"publish","type":"post","link":"https:\/\/blogs.ubc.ca\/technut\/2019\/09\/08\/which-investments-do-americas-wealthy-use-to-counteract-a-recession\/","title":{"rendered":"Which Investments Do America\u2019s Wealthy Use to Counteract a Recession?"},"content":{"rendered":"

\"\"<\/p>\n

The American economy is booming at the moment \u2013 but booms only last for so long. If history tells us anything, it\u2019s that we\u2019re likely to experience a recession within the next five to seven years. And when this recession comes, financially savvy Americans will have a plan for how they can protect their portfolios with wise investments.<\/p>\n

What is a Financial Recession?<\/strong><\/p>\n

If we want to have a discussion about recessions and the smart steps wealthy people take to successfully counteract the negatives that come with them, it\u2019s important that we begin with a clear understanding of exactly what a recession is.<\/p>\n

Technically speaking<\/a>, a recession is a period between a peak and a trough. By contrast, the period between a trough and a peak is known as expansion. The period from late 2007 to early 2009 was a recession. The period from early 2009 to today has been a period of expansion.<\/p>\n

During a recession, there\u2019s a significant decline in activity across the entire economy. This period generally lasts anywhere from a few months to a couple of years. (Economists generally wait until there\u2019s two consecutive quarters of declining GDP to use the \u201cR\u201d word.)<\/p>\n

6 Investments Built to Withstand a Recession<\/strong><\/p>\n

During a recession, investors aren\u2019t necessarily looking for massive returns. Most will actually settle with breaking even or making some small percentage gains. What you don\u2019t want to do is absorb the brunt of the decline \u2013 which is easier said than done.<\/p>\n

Every situation is unique, but you\u2019ll find that most successful investors turn to investments like these during down markets:<\/p>\n

    \n
  1. Cash<\/strong><\/li>\n<\/ol>\n

    It might not be an investment in the normal sense of the word, but cash can be a smart method of storing money during a recession.<\/p>\n

    Think of it this way: What\u2019s the difference between someone who has $1,000 sitting in cash making no money and someone who has $1,000 plugged into an investment that loses 20 percent? At the end of the day, the person with the cash is up $200. Sometimes not losing money is valuable place to be.<\/p>\n

      \n
    1. Treasury Bonds<\/strong><\/li>\n<\/ol>\n

      High-quality bonds \u2013 such as U.S. Treasury Bonds \u2013 are great for recessionary periods. They\u2019re slightly more risky than holding money in cash, but they also provide greater returns. During negative economic environments, look for bonds that last around five or six years, as this will get you the best ROI.<\/p>\n

        \n
      1. Municipal Bond Funds<\/strong><\/li>\n<\/ol>\n

        While they carry a bit more risk than treasury bonds, municipal bond funds \u2013 those issued by state and local governments \u2013 are still pretty safe. You may be able to squeak out a couple of percentage points in interest, which is better than nothing.<\/p>\n

          \n
        1. Dividend Aristocrats<\/strong><\/li>\n<\/ol>\n

          Dividend stocks are great. The only problem is that many of them decline in value during recessions \u2013 leaving you with negative returns, instead of positive cash flow. But there are still some dividend stocks that are valuable.<\/p>\n

          Your best bet is to go with \u201cdividend aristocrats.\u201d This is the title given to dividends that are in the S&P 500 and have 25+ consecutive years<\/a> of dividend increases. In other words, they\u2019ve continued to increase dividend payments every year for the last quarter century (even during the 2007-2009 recession). In a stock market where nothing is certain, that\u2019s pretty good!<\/p>\n

            \n
          1. Rental Real Estate<\/strong><\/li>\n<\/ol>\n

            It\u2019s always a great idea to purchase real estate when the market bottoms out. The problem is that you don\u2019t know when the market is reaching its low point. So instead of trying to perfectly time the market, you should instead try to invest in the right type<\/em> of real estate.<\/p>\n

            A recession is a great time to begin buying apartment complexes<\/a>. While the number of people buying homes declines in a recession, the number of people renting goes up. This makes it a strong investment opportunity.<\/p>\n

              \n
            1. Yourself<\/strong><\/li>\n<\/ol>\n

              Quite honestly, the smartest investment you can make is in yourself. The more money you put into improving your talents, acquiring new skills, and networking with other professionals, the greater your chances are of increasing your income (both now and in the future). Don\u2019t miss this!<\/p>\n

              Stay Plugged In<\/strong><\/p>\n

              We\u2019re at a very interesting point in time. We\u2019ve experienced nearly a decade of unprecedented growth, which was preceded by one of the largest recessions in American history, and storm clouds are brewing. Most experts agree that a recession of some sort is on its way within the next two or three years \u2013 though it\u2019s hard to say exactly when.<\/p>\n

              When it comes to making investment decisions, it\u2019s important that you don\u2019t just hand everything off to someone else. Even if you have the best financial advisors and experts in your corner, it\u2019s wise to stay abreast of what\u2019s happening at all times. You\u2019ll discover that gut instinct and intuition can be as important as technical analysis.<\/p>\n","protected":false},"excerpt":{"rendered":"

              The American economy is booming at the moment \u2013 but booms only last for so long. If history tells us anything, it\u2019s that we\u2019re likely to experience a recession within the next five to seven years. And when this recession comes, financially savvy Americans will have a plan for how they can protect their portfolios […]<\/p>\n","protected":false},"author":48857,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[483],"tags":[],"class_list":["post-773","post","type-post","status-publish","format-standard","hentry","category-business"],"yoast_head":"\nWhich Investments Do America\u2019s Wealthy Use to Counteract a Recession? - TechNut<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/blogs.ubc.ca\/technut\/2019\/09\/08\/which-investments-do-americas-wealthy-use-to-counteract-a-recession\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Which Investments Do America\u2019s Wealthy Use to Counteract a Recession? - TechNut\" \/>\n<meta property=\"og:description\" content=\"The American economy is booming at the moment \u2013 but booms only last for so long. 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