Recessions usually spark all sorts of concerns and unrest, but in the eyes of the savvy investor this can promote some fantastic opportunities.
Granted, there are some forms of investment which should be avoided like the plague during these periods. However, there are others which can really help you ride the storm and ultimately, turn healthy profits.
Through the course of today’s guide we will now take a look at some of these investments, and show the ones you should be looking towards if we do enter the dreaded recession again.
Federal government bonds
According to Gregory Lindae, this is one of the most popular funds when a recession hits the country. This is because government funds tend to have less risk, for the simple reason that the government can levy taxes and even print money so they don’t default.
Admittedly, this next type of fund is only going to be relevant for the wealthier investors, but even during a recession they can work very well. The basis of a hedge fund is that they will perform regardless of the market. A foul weather fund is an even better form of this, as the design of these funds means that they tend to perform even better when the markets are declining.
Nevertheless, even though hedge funds should be on your hit list during a recession, there is a caveat. There is still an element of risk in hedge funds and it’s for this reason that you should look to make them just a small element of your overall portfolio.
Large cap funds
Another investment that you could look towards during times of hardship are large cap funds. In short, this refers to those stocks that are bought in larger companies.
The theory behind this is simple; experts believe that there is a lot less risk when it comes to larger companies than smaller ones. In other words, they are more equipped to deal with a challenging market situation, and this benefits your situation.
Corporate bond funds
Admittedly, this next fund is taxable, but it follows on from the previous point we made about larger companies having something of a safety net.
Bonds issued by corporate funds might carry more risk than ones of the government variety, but it should go without saying that the payouts are much higher as well. You can offset this risk somewhat by turning to a higher-quality bond, but it should also be highlighted that the risks involved in corporate bonds are still much lower than stock funds.
Something that falls in-between the corporate and governmental funds we have looked at are municipal bonds. These are issued by the local authorities and as such, do carry quite a lot of safety. At the same time, there is some risk involved in them, so if you are expecting to be completely protected you should turn your attention to one of the other forms that we have mulled over.