Yahoo Finance How to Keep Making Money During a Recession
For all of 2023, we saw a recession approaching in our rear-view mirror. Some economists like David Rosenberg speculate that a recession is still yet to come, claiming that “our conviction that the recession has been delayed but not derailed is still running at a high level.”
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After announcing hundreds of layoffs at Amazon, Jeff Bezos additionally warned consumers, “if you’re an individual considering purchasing a big-screen TV, you might want to wait, hold onto your money, and see what transpires.”
Whether or not we experience a recession in the near future, there are ways to position your portfolio to protect yourself even if one occurs far into the future.
Whether we experience a recession in the near future or years from now, investors can take proactive action regarding current economic struggles and prepare for future ones by investing in recession-proof sectors. Here are three sectors that you can rely on to perform well even if the economy falls into a recession.
Utilities
Utilities are an ideal choice for investors seeking stability, especially during economic downturns. While demand for sectors like retail and hospitality decreases in demand, the need for essential services like electricity, water and gas remains constant regardless of economic fluctuations.
Moreover, the high barriers to entry, including substantial infrastructure costs and stringent government regulations, deter new competitors and safeguard the profits of existing utility companies. This stability translates into reliable dividends for investors, further enhancing the sector’s appeal. For those considering investment opportunities in utilities, explore top holdings within the Utilities Select Sector SPDR Fund (PCX:XLU) like NextEra Energy (NEE) or Southern Co. (SO).
Healthcare
Unlike many industries, healthcare remains largely unaffected by economic fluctuations, as people cannot defer most healthcare spending. Moreover, healthcare benefits from favorable demographic trends, notably the aging population and ongoing innovations in medical technology, promising long-term growth potential. While pinpointing specific healthcare stocks may pose a challenge for average investors, healthcare ETFs offer a diversified and profitable avenue to tap into this sector.
Vanguard Health Care ETF (PCX:VHT) provides broad exposure to the healthcare landscape, while investors seeking targeted segments can explore options like iShares Biotechnology ETF (NGM:IBB) and iShares U.S. Medical Devices ETF (PCX:IHI). Companies within the healthcare industry, such as Johnson & Johnson (JNJ), CVS Health (CVS), Pfizer (PFE), UnitedHealth Group (UNH) and Walgreens Boots Alliance (WBA), demonstrate resilience during recessions due to the essential nature of their products and services, ensuring stable demand regardless of economic fluctuations.
Real estate
Despite rising mortgage rates, real estate has historically outperformed equities and bonds during periods of increased interest rates, showcasing its enduring stability. Well-chosen properties offer more than just price appreciation; investors can also benefit from a steady stream of rental income.
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Additionally, real estate investment trusts (REITs) and crowdfunding platforms provide accessible avenues for individuals to enter the real estate market without the hassle of property management. Whether through existing properties, farmland, office/warehouse space, or REITs, real estate investments offer diversification and insulation against short-term market fluctuations, making them a sound choice for investors seeking stability and long-term growth.
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