20 Investments That Are Recession-Proof

[RV_]

Lots of folks think diversification only means stocks and stock collections like funds etc. But diversification is "defensive" investing and should include non-stock market investments as well as defensive stocks.

This article explains each of the below investments briefly. Most we all know about but some are not as well known and can help in diversifying your portfolio of investments and not all are stocks or stock derivatives, so won't be as affected as stocks will in volatile times.

Here are the diversified and defensive investment topics explained in the article:

1. Pharmaceutical Stocks

2. High-Yield Savings Account

3. Technology Stocks

4. Grocery Stores

5. Utility Stocks

6. Precious Metals

7. Rental Properties

8. Companies With Solid Balance Sheets

9. Certificates of Deposit

10. Money Market Accounts

11. High-Dividend Stocks

12. Cash

13. Educational Courses

14. US Treasurys

15. Senior Living Stocks

16. Waste Disposal Companies

17. Diversification

18. Walmart

19. Hedge Funds

20. Market-Neutral Funds

21. Investments You Can Pick Up During a Recession

22. Cyclical Stocks

23. Market Indices

24. Treasury Inflation-Protected Securities (TIPS)

25. Travel and Leisure Companies

All of the above are summarized in the full article here:

https://www.gobankingrates.com/investing/strategy/investments-recession-proof/#2?utm_campaign=1047093&utm_source=msn.com&utm_content=20

Safe travels! (And investing)

 

 

 

[Kirk W]

11 hours ago, RV_ said:

All of the above are summarized in the full article here:

 Good, but almost a year old article.

20 Investments That Are Recession-Proof

By John Csiszar Feb 9, 2021

5 Things to Invest in When a Recession Hits          OCT 25, 2021

 

Edited December 12, 2021 by Kirk W
Add information.

[Barbaraok]

High Yield Savings Account - 😂😂😂😂

 

[Kirk W]

12 minutes ago, Barbaraok said:

High Yield Savings Account -

 

High yield accounts are difficult to find nowadays(0.5%?). The CD market really stinks too.

[RV_]

"Just because the near-term economic picture is negative doesn’t mean you should stop saving and investing. However, you may want to give your portfolio a once-over to see if you are positioned in the most recession-proof manner possible. No investment is completely immune to an economic downturn, and markets can always be unpredictable, but some investments are traditionally more resilient during difficult economic times."

I would suggest folks read my posted article because the categories covered have not changed.

From the article here is the short explanation of High Yield savings accounts, in the article which must be taken as a whole along with the rest of them.

Barb and Kirk, where do you park large blocks of money (Large= anything over $25k for example) when you put in a buy order? By linking my accounts with my brokerage I can keep money in a .25-.5% account until the stock or other investment drops to my buy price? I have two blocks liquid and one will be retracted to my higher yield savings account from my no to almost no yield investment account that only holds overflow.

So as investors Kirk and Barb, where do you hold your liquid assets safely for temporary movements in and out of investments? Are they FDIC insured?

It is recommended that folks have a year's living expenses liquid in case of a downturn. I follow that advice as well.

Barb and Kirk, what part do you disagree with or think is dated from the following?

"High-Yield Savings Account

A high-yield savings account might not be the best long-term investment for your money, but it can be a great place to ride out uncertain economic times. Even in an era of near-zero interest rates, many high-yield accounts still offer more than you’d get in a normal checking or savings account. And this way your money will be safe during a recession when you might need emergency funds to get you through tough times."

Then on CDs it says:

"Certificates of Deposit

Certificates of deposit are in a similar category to savings accounts when it comes to safety. Both are insured by the Federal Deposit Insurance Corp. up to $250,000 per depositor. CDs typically pay higher rates than standard savings accounts and may pay as much or more than high-yield savings accounts, however, a CD often locks in funds for a set amount of time so you won’t have easy access to that money. If you don’t think you’ll need that money anytime soon, a CD can be a good place to ride out a recession and keep your funds safe until you can reinvest your money into investments with higher return potentials.

"Rental Properties

Housing as an investment isn’t particularly recession-proof. In fact, during major economic traumas, housing prices tend to go down. But rental properties can still be defensive in economic recessions because of the passive income they provide. In fact, prospects for owners of rental properties may improve, as potential homebuyers may decide to rent instead until the recession passes, and people still need places to live.

The same caveats in choosing a rental property, such as being sure to choose an in-demand property in a well-located area and understanding the work and risks involved in owning a rental property, apply whether or not you are buying in a recession."

The investment instruments haven't changed. I agree with the article, which of the 20 investment instruments covered in the article "20 Investments That Are Recession-Proof" do you find "dated" Kirk, specifically?

Edited December 12, 2021 by RV_

[Barbaraok]

Parking money in a Money Market fund as part of your brokerage account is one thing, something pretty common for people to do.  Depending upon a Savings or Money Market fund to be a substantial part of your retirement funds for day to day living would have one ending up with less and less each month.   For several months it would be better to park the money in a long-term treasury fund so you would get a little interest (better than money market/savings) while waiting to use it for a purchase of some kind.   

[RV_]

Barb, you can't time the market. When a buy or sell order is in it the stock is bought or sold automatically when the stock goes down to the buy price set. I would have missed the drop to $350 of Tesla stock had I not had the money ready in my Schwab account. Wired monies may not be available until later in the day, several days and a buy opportunity missed. Have you read the article? None of the instruments it shows are designed as a "put all your eggs in this basket" recommend at all. Quite the opposite.

55 minutes ago, Barbaraok said:

Parking money in a Money Market fund as part of your brokerage account is one thing, something pretty common for people to do.  Depending upon a Savings or Money Market fund to be a substantial part of your retirement funds for day to day living would have one ending up with less and less each month.   For several months it would be better to park the money in a long-term treasury fund so you would get a little interest (better than money market/savings) while waiting to use it for a purchase of some kind.   

Barb, the article discusses 20 different investment instruments and even discusses diversification:

"Diversification

One of the best investments you can make during a recession doesn’t trade on any exchange and can’t be purchased directly from any company: diversification. Diversification is the process of allocating different sections of your portfolio to noncorrelated investments. With proper diversification, your entire portfolio won’t be going down or up in massively volatile swings. Rather, a portion of your investments should be going up when another goes down, to smooth out your ride. As excessive portfolio volatility often leads to bad investment decisions, such as selling everything at the bottom, proper diversification can help ensure you remain invested until the inevitable recovery after the recession."

Nowhere in the article and certainly not by me was it suggested any one of them be used alone. The article was about diversifying your portfolio for any coming downturn and we all know a recession is long overdue. I will be posting an article about why the billionaires are bailing out right now, and it could be biz as usual or an indicator for caution ahead.

The article also covered money market accounts We have used both Money Market and High Yield savings when we need to park money short term. (defined as High Yield today not 13 years ago before the great recession of 2008 - the terrible rates of today have been with us since 2008 give or take, so the recommends are certainly not dated)

"Money Market Accounts

Money market accounts are another example of a federally insured deposit account where you can trust that your money is safe. Money market accounts are typically semiliquid hybrids of checking and savings accounts, with limited checkbook access and modest annual percentage yields. Some online banks, in particular, have begun offering high-yielding money market accounts, and this can be a good place to hide out while you wait for the current economic and market uncertainty to pass by."

I am still referring to the excellent investing strategy article I posted: https://www.gobankingrates.com/investing/strategy/investments-recession-proof/#2?utm_campaign=1047093&utm_source=msn.com&utm_content=20

Edited December 12, 2021 by RV_

[Kirk W]

48 minutes ago, Barbaraok said:

Parking money in a Money Market fund as part of your brokerage account is one thing, something pretty common for people to do.

In my view, the biggest challenge today is where to put your emergency funds, if you keep 6 months or more of living expenses. Even in a brokerage account it is unlikely to keep up with current inflation levels. And for we who are past the age of 70 it probably isn't even possible to have the majority of funds in low risk funds and still keep up. It is a very volatile market. 

Quote

It's important to keep in mind that money market funds are not covered by the FDIC's federal deposit insurance, while money market deposit accounts, online savings accounts, and certificates of deposit, are covered by this type of insurance. Like other investment securities, money market funds are regulated.

 

[RV_]

Kirk,

You posted bad information, see the screen shot below. (I like screenshots I can save them locally. 😉)

You posted that money Market accounts are not FDIC insured? Money market accounts are FDIC insured.

Excerpt from the FDIC website::

"Deposit Products

The following are examples of deposit products which are insured by the FDIC

• Checking accounts
• Savings accounts
• Money market deposit accounts
• Certificates of deposit (CD)
• Prepaid cards (assuming certain FDIC requirements are met)"

Source: https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/#:~:text=FDIC insurance covers all types of deposits received,bank (such as cashier's checks or money orders).

Edited December 12, 2021 by RV_

[Kirk W]

13 minutes ago, RV_ said:

You posted that money Market accounts are not FDIC insured? Money market accounts are FDIC insured.

They are not if part of a brokerage account as was the subject of that post. 

Edited December 12, 2021 by Kirk W
correct typo

[RV_]

29 minutes ago, Kirk W said:

They are not if issued by a brokerage account as was the subject of that post. 

I thought Barb just used fund when she meant accounts, but that was not in my article or my posts, so you will have to take that up with her.

What post Kirk? Your second quote leads nowhere. Who posted it? I must have missed it but it was not by me.

The topic was this article and the only mention I made was this about money market accounts. I will post again from the article:

"Money Market Accounts

Money market accounts are another example of a federally insured deposit account where you can trust that your money is safe. Money market accounts are typically semiliquid hybrids of checking and savings accounts, with limited checkbook access and modest annual percentage yields. Some online banks, in particular, have begun offering high-yielding money market accounts, and this can be a good place to hide out while you wait for the current economic and market uncertainty to pass by."

Not a money market fund. It takes several days to access money in any fund, so for my example of parking a small amount for fast buys on volatile stocks when minutes count to get in on a dip, a Money market account is OK I use one occasionally for a few months if need be.

But no one I know uses Money Market funds anymore and for those interested, it is because Money market accounts yield the same but are FDIC insured. How Money Market Funds got edged out is outlined in the interesting article below:

"2. Money Market Accounts

Back in the 1980s, when interest rates were much higher than they are now, there were legal limits on how much interest a savings account could offer. Many customers responded by taking their money out of banks and putting it into money market mutual funds, which invested in short-term bonds, to earn a higher rate. This was bad news for the banks, which no longer had enough money in their coffers to make loans.

So to help the banks, Congress passed a law called the Garn-St. Germain Depository Institutions Act of 1982. It allowed banks to offer a new type of account, called a money market account, that paid interest at the money market rate rather than the capped savings rate.

Like a savings account, a money market account through CIT Bank is safe, liquid, and FDIC-insured (or NCUA-insured) up to a maximum of $250,000. However, it’s different from a savings account in several ways:

• Interest Rate. Money market accounts generally pay a bit more interest than savings accounts at the same bank.
• Account Balance. When money market accounts were first created, it took a minimum of $2,500 to open one. That rule is gone now, but many banks still require a higher minimum balance for a money market account than for a basic savings account. The minimum balance can be anywhere from $1,000 to $25,000.
• Check and Debit Card Use. With a money market account, you can make a limited number of transactions by check – usually three per month. Some money market accounts also allow transactions by debit card in place of or in addition to check transactions.
• Transactions Per Month. Like savings accounts, money market accounts are controlled by Regulation D. This means you’re limited to six transfers or withdrawals each month – not counting withdrawals made at the teller window or ATM. Your three checks per month count toward this limit."

Source scroll down to money market accounts:

https://www.moneycrashers.com/safest-investments-for-your-money/#:~:text=Money market funds are also considered a safe,is that the principal itself could lose value.

 

Edited December 12, 2021 by RV_

[Barbaraok]

RV:

Several days to access money in a fund?  Really?   I put in a sell order, with proceeds to my checking account, it is there the next day if I put in the order early, or the day after if it was in the afternoon/evening.     Yes, we keep a minimum savings account linked to our checking account to avoid any bank charges and for emergency withdrawals.  It is parked money, period.  We don't depend upon that for our retirement.   

I don't remember saying that one would depend upon a money market/CD/savings account for ALL of their retirement (social security is ongoing for everyone) but rather there are a lot of people who are so scared of even index funds that they substantial portions of their retirement funds in such accounts.     

Kirk:

At our age we are not in danger of losing a job, so the 6 months of living expenses figure would be in case of what?   The world ending? Total collapse of the financial systems?   Tornado hitting the house - that's why one has insurance on the house.     Massive car breakdown - preventative maintenance and knowing it is time to upgrade limit exposure.    Illnesses, well we know that is coming and have planned accordingly.     So while having 1 month's income stream set aside, why would we need 6 months?

[RV_]

1 hour ago, Barbaraok said:

RV:
Several days to access money in a fund?  Really?   I put in a sell order, with proceeds to my checking account, it is there the next day if I put in the order early, or the day after if it was in the afternoon/evening.

  

Barb, the next day or the day after does not work for me. When I caught my last Tesla buy 18 months ago it went down to just under $350 from the $2000 plus a share it was just before the big stock split. Then when it split it dropped a lot fast, and then shot back up over $500 that same day.

Take what you can use and leave the rest

Edited December 12, 2021 by RV_

[Kirk W]

4 hours ago, Barbaraok said:

At our age we are not in danger of losing a job, so the 6 months of living expenses figure would be in case of what?

I didn't say that I have 6 months of expenses, only that most advisors suggest 3 to 6 months of expenses. And inflation is one of the reasons that I don't, but I do have ready access to funds equal to 3 months or so, most of the time. 

[Barbaraok]

One of the things that has changed is how rapidly one is able to move funds now compared to even just a few years ago, so that you can keep more of your funds working for you.   And of course, at our age once has to consider how much one wants to spend on ourselves versus setting money aside for your family.   

[Kirk W]

9 hours ago, Barbaraok said:

And of course, at our age once has to consider how much one wants to spend on ourselves versus setting money aside for your family.

That is one of the things we are really looking at now. At the age of 80 one starts to realize that we have a limited amount of time to do things together and the pandemic has also played to that. Three retired people that we know have been lost to covid and another is now unable to travel so we are doing a major reexamination of our plans for the future. 

[RV_]

Back to the topic of investments that are more recession secure do any full timers rent property and if so do you use a family member to manage it or a property management firm?

What about feedback on some of the lesser used/known items in the list?

Any comments about the fewer list of  instruments from folks investing in/using them that are each briefly outlined in the article? Each is only a paragraph or two in the article. I am interested in hearing from folks who manage their own portfolios and are not using only a cookie cutter portfolio from a financial advisor.Those are fine but not my area of interest. Anyone buying some or all of these or focusing on one or three of the ones on this shortened list? I'd like to discuss the topic content rather than participants.

1. Utility Stocks

2. Precious Metals

3. Rental Properties

4. High-Dividend Stocks

5. US Treasurys

6. Senior Living Stocks

7. Hedge Funds

8. Market-Neutral Funds

9. Investments You Can Pick Up During a Recession

10. Cyclical Stocks

11. Treasury Inflation-Protected Securities (TIPS)

 

[NDBirdman]

#2, I would not recommend getting much because of the weight.  A light, small item if left with someone would easily be lost or stolen.  I have some, I would not want to try to carry much around because of the amount/weight of what I have.  This is one I would highly recommend if you dive into, having a safety deposit box in a bank, not in your/someone's SnB or RV.  PM paper stock, never, only physical PM.  I do have a couple coin albums I carry along so I can upgrade my coins if I find one nicer to replace an average coin with.  That can get pretty expensive depending on what set you wish to collect, I've not had one coin not gain value.

Saying that, I'm not a full timer, or any timer now.  Might be awhile before we find the one we want after ours was totaled out.  Our SnB is an investment but it will never be rental property, family made that mistake, never again.

[Kirk W]

Inflation vs. Recession...and Which One Economists Worry About More

The truth is that there are no recession proof investments, only some that feel the effect less. The second part of the question is, which risk is greater, inflation or recession, since the best investments during periods of inflation are not the best when a recession comes along.

Industries That Thrive During Recessions

There are no simple answers and only guesses about the timing of either. Be very careful whose advice you choose to follow!

 

[RV_]

Thanks ND and I agree, never certificates that the PMs are owned and remotely stored without physical control. Kruggerrands and coins as you mention would be easier to trade or cash in as well as carry, with the bulk in a Safety Deposit Box at a bank.

I agree on rentals. We had three rentals in Louisiana briefly that our late dad owned and it was a PITA! I will never be a landlord. Helped him evict a few and was armed just in case. People can be cheats, slobs, vandals, or all of those and more sometimes.

My son is going to rent this house after we move out and he owns it. 😱🤷‍♂️

[RV_]

Welcome to the Escapee forums Cinthya! Good post.