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Are there "recession-proof" investments?

POSTED ON MARCH 03, 2023    

When the chances of a recession are on the rise, investors start worrying about how their portfolio will perform during this time. That’s because asset value typically dips during downturns, meaning that slow or even zero growth is a very real possibility.


With all this, you might be wondering if there are any recession-proof investments available. The answer is a qualified “yes,” but there are some things you should know about them. Read on for the full details.


Holding on to value

Some investments are proof against recessions in the sense that their value won’t drop much, if it all, during this difficult period. These are known as safe haven assets, and your portfolio’s overall volatility might be easier to manage if you invest in some of them.


The reasons for an asset to be a safe haven can vary according to the situation. That’s why there are no investments which can be said to be “safe” under all circumstances.


However, there are a few that have held their value on many occasions, so these are the ones that experienced investors usually consider when hard times may be ahead. Examples of these are gold, government bonds, and defensive stocks.


Steady, not stellar growth

Certain safe haven assets actually go beyond maintaining their value by growing despite the challenges of the recession. At this time of falling value for most investments, any growth would be even more desirable than usual.


Keep in mind that, while steady, this growth isn’t likely to be very fast. Modest gains are more probable, although the predictability may make up for the lack of speed. Plus, the chances are high that there won’t be many suitable alternatives at that point.


When things get better

As the recession inevitably draws to a close, things will probably change. As the situation improves, the performance of other assets may rise sharply, making them more attractive than the steady-but modest safe havens.


While you may be tempted to transfer your money to the investments which might earn you more money, remember that economic downturns invariably happen, and so keeping some safe havens in your portfolio could help protect you in the future.


If you don’t have safe haven assets yet, you could consider doing your research to find out which ones held on to their value the best in the past. That way, you’ll have a shortlist of potential investments that you can pick from if economic trouble might happen in the near future.

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