No one likes to think about a recession, but the reality is that it happens. Even though it's not pleasant to think about, being prepared can help lessen the blow. If you're looking for ways to protect your investment portfolio in the event of an economic downturn, here are five smart investments to consider making.
Government Bonds: One of the most popular choices for investors looking for stability during an economic downturn is government bonds. Government bonds are loans that investors make to the government in exchange for interest payments. They're often seen as being low-risk because the government has a history of making timely interest payments. However, it's important to remember that government bonds are still subject to market conditions and interest rates, so there is some risk involved. Still, government bonds tend to be much less volatile than stocks, making them a good choice for investors who are risk-averse.
Real Estate: Surprised by this one? You wouldn't be on this blog without us talking about real estate. Real estate investment is an option for investors looking for stability during a recession. Unlike stocks or other paper assets, real estate tends to hold its value pretty well during an economic downturn.
Investing in real estate is a great way to diversify your assets and create some consistent income. There are many different ways you can go about doing this, such as becoming an investor-friendly landlord or hiring managers for properties that will be managed on behalf of yourself and others who trust them with their money (i.e., investors). You could also explore the idea of a schedule of real estate owned - which lets entrepreneurs see how quickly they're making progress toward passive income!
Additionally, income from rentals can help offset any losses you might experience in other areas of your portfolio. However, it's important to remember that real estate is not without its risks—particularly if you're investing in properties that are not cashflow positive. So while real estate can be a great way to protect your portfolio from losses during a recession, be sure to do your homework first and only invest in properties that will generate positive cash flow.
The rental properties also offer tax advantages. For example, the ability to deduct costs related to operating and maintaining them which can help reduce your taxes owed on primary income as well if you own one or more homes in this market! Property is an investment that will always hold its value over time so it’s important for future generations too--you want their children able to take advantage of these great returns when they grow up. There just aren't many resources like land/real estate available anymore because people don't want to part with it--and why would they when it only goes up in value?
High-Yield Savings Accounts: Another option for those who want to protect their money during a recession is to invest in a high-yield savings account. Unlike government bonds, high-yield savings accounts are FDIC insured, meaning that your money is backed by the full faith and credit of the U.S. government up to $250,000 per account. Additionally, many high-yield savings accounts offer higher interest rates than traditional savings accounts, making them a good choice for investors who want to grow their money while minimizing risk.
Gold/Precious metals: Gold has long been seen as a safe haven investment during times of economic turmoil. That's because gold tends to hold its value well during periods of inflation or economic uncertainty. Additionally, gold is a physical asset that you can hold onto, which can be reassuring for investors who are worried about paper assets like stocks or bonds losing value. Of course, there is still some risk involved with investing in gold, as its price can be volatile. But if you're looking for a way to protect your portfolio from losses during an economic downturn, gold may be worth considering.
No one knows when the next recession will hit or how severe it will be—but we do know that it's inevitable. So what can you do to prepare? By investing in assets like government bonds, high-yield savings accounts, gold, and real estate, you can help minimize the impact on your portfolio and even come out ahead when the economy starts to rebound.