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Maintaining your investment portfolio is important, especially during economic downturns. While no industry is impervious to a recession, some tend to perform better than others. By and large, your investment portfolio should be diverse. This is necessary to get the most out of your money as well as balance each investment’s risk and return.
So, what are the most recession proof investments you should consider adding to your portfolio? This can vary based on your financial goals, but there are plenty of opportunities out there. Below, we’ve outlined several recession proof investments for you to examine as you expand your portfolio.
The first recession proof investment we recommend is intentionally broad. Generally, it is good practice to examine the balance sheet of a company before you invest in it. This remains true when looking at what companies to invest with during a recession. If you find a company that you’d like to invest in, it never hurts to take a look at their capital structure.
A balance sheet can be quite telling when it comes to the financial stability of a company. Simply put, a balance sheet shows you what a company owns and what they owe. These are known as assets and liabilities.
Furthermore, you can examine a company’s working capital by finding the difference between its current assets and its current liabilities. Current assets can refer to a company’s accounts receivable, or unpaid customer bills, while accounts payable is what the company owes.
As a whole, housing itself is not a recession proof investment. Consider the housing crisis that occurred during 2007-2009. During the Great Recession, the Case-Shiller U.S. National Home Price Index shows a marked decline in the price of homes.
If the prices of houses are going down in a recession, what area can provide more recession proof investments? According to Forbes Real Estate Council member Aaron Marshall, the housing market is hit more by a recession than the rental market. This is also influenced by the fact that people tend to rent when they can’t afford to buy a house during an economic downturn.
Overall, there are several benefits that investing in commercial real estate can bring you. When it comes to tax advantages, real estate can be appealing. CRE investors can take advantage of the mortgage interest deduction and depreciation benefits. CRE tends to have high mortgage expenses, so these tax benefits allow for a high annual tax deduction.
Another area to look to for recession proof investments is the utility industry. Investing in utility stocks can be a reliable investment opportunity during a recession because utilities are a necessity.
A consumer can cut back on discretionary expenses such as eating out. Conversely, spending money on necessities like electricity is still present during a recession. This is because there is always a need for utilities regardless of whether or not we’re in a recession.
Additionally, both local and federal governments regulate the utility industry. This can make it easier to predict the cash flow of a company within the industry. In doing so, you can likely find a company’s stocks to invest in that provide decent dividend payouts.
While this is by no means an exhaustive list of recession proof investments, these opportunities can give you a place to start. Another way to navigate your investments during a recession is with expert financial guidance.
By partnering with a firm like AVANA Capital, you gain access to invaluable industry insights and flexible funding options. AVANA Capital specializes in niche sectors, including commercial real estate, renewable energy, and hospitality.
In the end, AVANA Capital’s industry expertise provides you with the support necessary for dynamic and complex markets. Whether you’re looking for a funding solution or investment guidance, the team at AVANA Capital is ready to help.
Curious about the investment opportunities available to you?
Contact the team at AVANA Capital to learn more about your investment portfolio today.