The economy has seen better days, but that doesn’t mean you should bury your head in the sand and pretend it isn’t happening. You have to face facts, and you also have to prepare yourself and your investment portfolio if you want to get through this downturn in as good shape as possible.
Fortunately, there are some smart investment opportunities out there during this time of financial hardship. In order to find them, you first need to understand why the recession happened in the first place. Here are seven best investment opportunities in a recession
Start with real estate
The housing market is always good for those who are looking for good returns, and even better for those who take advantage of the current down market. Investors can get great deals on properties that have been foreclosed on by banks and other financial institutions.
The housing market will always remain strong because people will always need shelter. Plus, investors can benefit from the low prices since they will be able to quickly turn around and sell their property to make a profit in this slow economy.
Gold & Silver
Investing in gold and silver may not be the most exciting thing to do, but it's one of the safest. Historically, during periods of economic instability and uncertainty, people have traditionally turned to gold and silver as a way to safeguard their wealth.
Gold and silver remain one of the only truly inflation-proof assets. This means that if your money is sitting idle in an account for 20 years or more, it will likely buy about the same amount of goods at the end of that period as it would now.
Dividend stocks
A company that pays dividends is an excellent choice for investors, especially in a recession. Dividends are essentially free money, as the price of the stock doesn't change when the dividend is issued.
And it's not just about receiving cash every year. Companies have to keep generating profits each year to pay these dividends and maintain their share prices. If they can't do this, then they're less valuable to investors than companies that don't pay dividends because at least there's hope that the company will turn things around.
Bonds
- They offer guaranteed returns that are higher than most other investments. - Bonds are considered to be much safer than stocks when it comes to risk. - Investing in bonds will help you diversify your portfolio and make it less risky by decreasing the amount of money that is invested in any one security.
- Bonds offer tax benefits for those who purchase them for retirement purposes or financial aid for college expenses. Withdrawals from bond funds are typically taxed at ordinary income rates, which can range from 10% to 39.6%.
Small businesses
- The type of industry: What kind of industry is it? Is it likely to grow during this time period? Does it have an international presence? Does this type of industry require much upfront capital?
- The management team: Is there a solid management team with proven experience and expertise? Do they have connections with investors that could provide additional capital? - The product or service: Does the company offer a product or service that is likely to be desired by consumers during this time period, even if the price might be lower?
- Competition: Who are the competitors, how do they compare, and how will they fare during the recessionary environment?
- Market share: How strong is their market share now and what are their prospects for growth in the future?
Crowdfunding sites
1) Kickstarter- Kickstarter is an all-or-nothing platform where backers pledge funds in exchange for rewards or benefits, depending on their level of contribution. Projects must meet their goal within the specified time frame or no money changes hands.
I have invested in several projects that met their goals and have been rewarded with something that I wanted or needed. I also invested in one project that was unsuccessful, but it’s not about the success of any one project; it’s about supporting people with ideas and passions to get them off the ground.
2) Indiegogo- Indiegogo lets you keep what you raise whether your campaign meets its goal or not. You can also choose from three different funding methods: fixed funding, flexible funding and equity crowdfunding (through Wefunder). You will be able to make back at least what you put into your campaign if it doesn't reach its goal.
International investments
Investing abroad is one of the smartest things you can do to hedge against a recession. That's because the US dollar is on the decline, so it's falling in value relative to other currencies, including major currencies like euro and yen. The weakening US dollar means that international investments will bring back more US dollars when they are converted back into dollars.
When investing abroad, though, it's important to be mindful of currency fluctuations. You'll want to make sure that your investment is well hedged against exchange rate risk by using an inverse exchange-traded fund (ETF).
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