It can be difficult to know where to safely invest your money during a recession. You want to be sure that you are taking minimal risks and realizing the most return on your investment (ROI). It is important to keep in mind that there are investments that are not cyclical and reliant on the economic cycle to determine their survival.
There are a number of options that are still viable when considering how to invest during a recession. Read on to explore ideas on how to invest $500 safely in a recession.
Table of Contents
1. Defensive Stocks
Investing in stocks that are recession resistant is one of the best ways to keep your money working for you through challenging times. These stocks are tied to industries that are unlikely to be fiercely adversely affected by a recession simply by the nature of what they provide. Some of the businesses that are included in this class are as follows:
Simply said, even during the worst of financial times, consumers will need to purchase food. This means that grocery stores will continue to have customers and stay in business. The larger chain stores with global locations are likely to fair the best.
Household Staples Manufacturers
Basic household items such as toilet paper, paper towels, soap, shampoo, toothpaste, and the like are going to be purchased. Better known manufacturers of these products will still see demand for the items and will continue to sell them.
While nobody wants to think about the viability of businesses that provide services related to death, there is no denying that these businesses are going to continue, even during a recession. These could include those that build caskets, urns, and other similar necessities to funeral homes.
2. Dividend Stocks
Investing in dividend stocks can be a source of income and a good way to protect your investment. Dividend stocks are those that provide a percentage of their profit back to their stockholders. While not all stocks remain untouched by a recession, those of stronger recession-resistant industries are a good option.
Industries relating to things like health care and household staples are likely to continue to flourish during the lean times. Those that offer dividend stocks could provide steady returns on investments.
3. Fixed Annuities
An annuity is essentially an agreement made between an investor and an insurance company. The agreement allows the funds that you provide to the insurance company to accumulate interest over time. In some cases, the funds can be invested in the stock market.
The investor will either provide a lump sum payment to the insurance company or they will make regular payments to the annuity.
Payments are then made to the investor over time at regular intervals at an agreed-upon disbursement start date. A guaranteed income fixed annuity guarantees a set interest rate for a specified amount of time. A growth potential fixed indexed annuity bases the interest rate on a market index and also participates in the stock market.
The specific time that the funds are held before the disbursement period is based on the agreed-upon terms in the contract. This can be a safe way to manage money and invest during a recession.
4. Treasurer Bonds (T-bonds)
When it comes to reliability a fixed interest rate treasurer bond, also known as a T-bond, is one of the most familiar. T-bonds are debt securities that are issued by the U.S. Treasury Department and used to pay for governmental spending. These bonds have a maturity of 20 to 30 years, but have a higher interest rate than other options.
The Treasury issues interest payouts to the bondholder twice a year. When the maturity date arrives the bondholder will receive the face value of the bond.
5. Precious Metals
One of the oldest trade items across the world is precious metals. Silver, platinum, and gold are among those that can withstand the pressure of a recession.
These types of investments won’t provide you with any immediate income, but can be a good way to hold your investment until the time is right. They are an easy to manage way of investing your money and are simple to handle when you are ready.
It is important to determine the best way to manage money and investments during a recession ahead of time. While riding through a recession can be frightening, it can be better handled if you are prepared financially. Putting your plans for building your financial future on hold is not necessary. There are options that fit many goals and allow investors to continue to move forward.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He’s been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What’s Your Story, and more.
He loves to share his personal finance tips and money management wisdom with others on his website, ShawnManaher.com, to help them find financial freedom.