Should you buy stocks during recession?
It can be a great idea to invest during a recession -- but only if you're in a strong enough financial position to do so and only if you have the right attitude and approach. You should never compromise your near-term financial security for long-term gain.
Bottom line. If you're able to increase investments in the stock market during a downturn, it can be a great way to boost your long-term returns and achieve your investment goals.
- Defensive sector stocks and funds.
- Dividend-paying large-cap stocks.
- Government bonds and top-rated corporate bonds.
- Treasury bonds.
- Gold.
- Real estate.
- Cash and cash equivalents.
The best recession stocks include consumer staples, utilities and healthcare companies, all of which produce goods and services that consumers can't do without, no matter how bad the economy gets.
2024 is also an election year, historically the second-best year in the four-year political cycle (behind year three). We believe the historical signal of a strong start, combined with what is likely to be peak interest rates and positive earnings guidance, bode well for equities.
If you're looking to invest for your future -- five, 10, or 40 years from now -- now is as good a time as ever to buy stocks. Despite ongoing recession fears, it's important to remember the market is forward-looking. Stock values are based on future expected earnings.
Historically speaking, investors who hold on to their investments through recessions see their portfolios completely recover, and individuals who don't invest in the market at all lose out.
Most stocks and high-yield bonds tend to lose value in a recession, while lower-risk assets—such as gold and U.S. Treasuries—tend to appreciate. Within the stock market, shares of large companies with solid cash flows and dividends tend to outperform in downturns.
Equity Sectors
On the negative side, energy and infrastructure stocks have been the hardest-hit in recent recessions. Companies in these sectors are acutely sensitive to swings in demand. Financials stocks also can suffer during recessions because of a rising default rate and shrinking net interest margins.
You can keep money in a bank account during a recession and it will be safe through FDIC and NCUA deposit insurance. Up to $250,000 is secure in individual bank accounts and $500,000 is safe in joint bank accounts.
Who makes money during a recession?
Companies in the business of providing tools and materials for home improvement, maintenance, and repair projects are likely to see stable or even increasing demand during a recession. So do many appliance repair service people. New home builders, though, do not get in on the action.
- Seek Out Core Sector Stocks. During a recession, you might be inclined to give up on stocks, but experts say it's best not to flee equities completely. ...
- Focus on Reliable Dividend Stocks. ...
- Consider Buying Real Estate. ...
- Purchase Precious Metal Investments. ...
- “Invest” in Yourself.
In most cases, the gold price rose during the biggest stock market crashes. Does gold go up if a stock plunge occurs? In recent times, the answer has usually been, “Yes!” Notice this was regardless of whether the crash was short-lived or stretched over a couple years.
Analysts expect overall S&P 500 earnings to rise 9.5% in 2024 after increasing around 4% in 2023, LSEG data showed. But valuations have risen along with stock prices.
As a whole, analysts are optimistic about the outlook for stock prices in 2024. The consensus analyst price target for the S&P 500 is 5,090, suggesting roughly 8.5% upside from current levels.
S.No. | Company | Industry/Sector |
---|---|---|
1. | Tata Consultancy Services Ltd | IT - Software |
2. | Infosys Ltd | IT - Software |
3. | Hindustan Unilever Ltd | FMCG |
4. | Reliance Industries Ltd | Refineries |
It may make for some temporary uneasiness, but if you leave your portfolio alone, you'll set yourself up to get through this downturn unscathed. If you sell investments out of panic, you might lock in losses you never quite manage to fully recover from.
Typically, you'll see your stock portfolio go down during a recession. The dropping stock values partly stem from massive sell-offs as many investors try to get out of the market. As more investors sell their shares, the stock prices fall.
Cash: Offers liquidity, allowing you to cover expenses or seize investment opportunities. Property: Can provide rental income and potential long-term appreciation, but selling might be difficult during an economic downturn.
During a recession, you can expect stock prices to fall across the board. This happens for a number of reasons. For one, as we mentioned before, consumer confidence plummets during economic downturns. People are less likely to spend money – which means businesses make less profit.
What are the worst investments during inflation?
What Are the Worst Things to Invest in During Inflation? Some of the worst investments during high inflation are retail, technology, and durable goods because spending in these areas tends to drop.
Generally, the industries known to fare better during recessions are those that supply the population with essentials we cannot live without that. They include utilities, health care, consumer staples, and, in some pundits' opinions, maybe even technology.
Build up your emergency fund, pay off your high interest debt, do what you can to live within your means, diversify your investments, invest for the long term, be honest with yourself about your risk tolerance, and keep an eye on your credit score.
For investors, “cash is king during a recession” sums up the advantages of keeping liquid assets on hand when the economy turns south. From weathering rough markets to going all-in on discounted investments, investors can leverage cash to improve their financial positions.
Contrary to investor expectations, several growth stocks including Apple Inc. (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN), and Netflix Inc. (NASDAQ:NFLX) grew during the 2008 recession, so investors don't have to ignore growth stocks to be conservative.
References
- https://finance.yahoo.com/news/jeff-bezos-drove-1997-honda-165103970.html
- https://www.forbesindia.com/article/explainers/top-10-richest-people-world/85541/1
- https://modelthinkers.com/mental-model/buffetts-two-lists
- https://www.investopedia.com/articles/pf/08/recession-proof-your-life.asp
- https://finance.yahoo.com/news/10-stocks-went-during-2018-233937263.html
- https://stockcircle.com/portfolio/warren-buffett/ko/transactions
- https://www.investopedia.com/articles/investing/080813/how-profit-inflation.asp
- https://qz.com/rivian-ev-startup-history-r2-1851319818
- https://www.nasdaq.com/articles/berkshire-hathaway-class-a-and-class-b-shares:-what-to-know-before-investing
- https://www.dailymail.co.uk/sciencetech/article-13327793/Jeff-Bezos-Rivian-Elon-Musk-Tesla-layoffs.html
- https://www.quora.com/What-is-the-3-rule-in-stock-trading
- https://www.linkedin.com/posts/davidolivencia_1000-invested-in-google-in-1998-as-an-angel-activity-7117229040553402368-md4b
- https://www.quora.com/Do-billionaires-like-Bill-Gates-Warren-Buffett-and-Mark-Zuckerberg-drive-normal-cars
- https://www.cbsnews.com/news/warren-buffett-donates-870-million-to-charities-before-thanksgiving/
- https://www.fool.com/the-ascent/banks/articles/is-it-too-risky-to-keep-all-of-your-money-at-the-same-bank/
- https://capital.com/berkshire-hathaway-shareholder-who-owns-most-brk-stock
- https://www.forbes.com/profile/jeff-bezos/
- https://europeanbusinessmagazine.com/business/howjeff-bezos-makes-3-5-million-an-hour/
- https://www.quora.com/Is-it-possible-to-have-one-billion-dollars-in-your-personal-savings-account-if-yes-what-are-the-implications
- https://homework.study.com/explanation/what-are-the-things-that-don-t-depreciate-in-value.html
- https://www.nasdaq.com/articles/what-happens-to-the-stock-market-during-a-recession
- https://finance.yahoo.com/news/jeff-bezos-investment-perplexity-ai-175855405.html
- https://trendspider.com/learning-center/the-rule-of-90/
- https://www.fool.com/investing/how-to-invest/famous-investors/jeff-bezos/
- https://www.investopedia.com/financial-edge/0210/rules-that-warren-buffett-lives-by.aspx
- https://www.newtraderu.com/2024/01/09/current-warren-buffett-car-2024-what-car-does-this-billionaire-own/
- https://smartasset.com/investing/5-things-to-invest-in-when-a-recession-hits
- https://finance.yahoo.com/news/charlie-munger-fraction-wealthy-warren-183501213.html
- https://www.linkedin.com/pulse/what-does-recession-mean-housing-market-bestrealestatemarket-jsskc
- https://www.hindustantimes.com/world-news/us-news/we-have-never-had-an-argument-how-charlie-munger-and-warren-buffetts-60-years-of-friendship-flourished-101701220994631.html
- https://www.investopedia.com/ask/answers/021615/why-doesnt-berkshire-hathaway-pay-dividend.asp
- https://goldsilver.com/blog/if-stock-market-crashes-what-happens-to-gold-and-silver/
- https://www.nasdaq.com/articles/warren-buffett%3A-12-things-poor-people-squander-money-on
- https://en.wikipedia.org/wiki/The_Giving_Pledge
- https://finance.yahoo.com/news/73-ownership-microsoft-corporation-nasdaq-110025777.html
- https://www.investopedia.com/terms/b/berkshire-hathaway.asp
- https://www.reuters.com/markets/us/sp-500-end-2024-with-small-gain-after-strong-2023-2024-02-22/
- https://www.forbes.com/advisor/investing/stock-market-forecast-2024/
- https://economictimes.indiatimes.com/magazines/panache/age-is-just-a-number-the-worlds-youngest-billionaires-all-under-50/slideshow/89248097.cms
- https://www.quora.com/Is-it-advisable-for-individual-investors-to-own-30-or-more-stocks-in-their-portfolio
- https://bpsandpieces.com/blog/posts/the-four-c-s-of-investment-costs/
- https://www.nasdaq.com/articles/here-are-warren-buffetts-top-artificial-intelligence-ai-stock-picks
- https://www.gatesnotes.com/Bio
- https://en.wikipedia.org/wiki/Bill_Gates
- https://www.euronews.com/health/2023/02/03/how-is-the-world-health-organization-funded-and-why-does-it-rely-so-much-on-bill-gates
- https://www.fool.com/investing/2023/11/22/3-incredible-warren-buffett-dividend-stocks-to-buy/
- https://fortune.com/2024/01/19/elon-musk-ai-startup-funding-1-billion-investors/
- https://finance.yahoo.com/news/9-money-lessons-bill-gates-150021794.html
- https://www.quora.com/Why-is-Berkshire-Hathaways-stock-price-so-high
- https://fortune.com/2023/03/21/bill-gates-warren-buffett-most-important-piece-of-advice/
- https://finance.yahoo.com/news/top-10-holdings-bill-gates-012439992.html
- https://www.wikihow.com/Contact-Warren-Buffett
- https://www.nerdwallet.com/article/investing/young-investors-prepare-recession
- https://www.moneyworks4me.com/about-stock-market/investment-basics/first-golden-rule
- https://www.ndtv.com/world-news/warren-buffett-to-donate-99-plus-wealth-after-death-discusses-will-in-rare-letter-4614630
- https://www.investopedia.com/articles/trading/09/risk-management.asp
- https://www.investopedia.com/berkshire-hathaway-s-top-companies-and-brands-4685441
- https://www.businesstoday.in/technology/news/story/meta-ceo-mark-zuckerberg-is-now-richer-than-microsoft-founder-bill-gates-416144-2024-02-05
- https://tradethatswing.com/the-1-risk-rule-for-day-trading-and-swing-trading/
- https://www.moomoo.com/news/post/30788732/bill-gates-earns-10-95-million-a-day-the-average
- https://www.reuters.com/legal/rivian-must-face-lawsuit-claiming-it-defrauded-ipo-investors-over-vehicle-prices-2023-07-06/
- https://www.investing.com/academy/trading/warren-buffett-investment-strategy-rules-fortune/
- https://www.news-daily.com/arena/parade/taylor-swift-is-in-her-billionaire-era-find-out-her-net-worth/article_d24621e5-bdb0-5342-8444-3d40188bef7c.html
- https://www.investors.com/how-to-invest/when-to-sell-stocks/
- https://www.fool.com/investing/how-to-invest/stocks/good-time-to-buy-stocks/
- https://en.wikipedia.org/wiki/Blue_Origin
- https://www.investopedia.com/terms/p/peterlynch.asp
- https://www.techopedia.com/largest-microsoft-shareholders
- https://www.gatesfoundation.org/about/leadership/william-h-gates-sr
- https://mashable.com/article/kim-kardashian-s-best-financial-moves
- https://www.investopedia.com/financial-edge/0811/9-businesses-that-thrive-in-recession.aspx
- https://www.businessinsider.com/how-old-billionaires-were-when-they-earned-their-first-billion-2016-2
- https://www.indmoney.com/articles/top-5-stocks-to-invest
- https://finance.yahoo.com/news/warren-buffetts-no-1-investing-132715262.html
- https://www.linkedin.com/pulse/what-90-rule-forex-broker-forex-global-czp0c
- https://obamawhitehouse.archives.gov/sites/default/files/Buffett_Rule_Report_Final.pdf
- https://www.quora.com/What-is-the-percentage-of-Bill-Gates-net-worth-that-is-liquid-assets
- https://www.forex.com/en/learn-trading/5-3-1-trading-strategy/
- https://money.usnews.com/investing/articles/best-investments-during-a-recession
- https://www.npr.org/series/5515387/buffett-promises-fortune-to-gates-foundation
- https://www.vectorvest.com/blog/stockmarket/how-does-a-recession-affect-the-stock-market/
- https://en.wikipedia.org/wiki/List_of_wealthiest_charitable_foundations
- https://www.quora.com/How-much-money-does-a-billionaire-spend-in-one-day
- https://finance.yahoo.com/news/bezos-gates-buffet-musks-net-150248645.html
- https://scenesarasota.com/magazine/warren-buffetts-beach-house-the-arrow-shirt-mansion/
- https://www.financialexpress.com/market/would-bill-gates-be-successful-if-he-didnt-drop-out-of-harvard-3060165/
- https://www.fool.com/the-ascent/buying-stocks/articles/heres-how-billionaires-buy-stocks/
- https://www.businessinsider.com/how-warren-buffett-spends-money-net-worth
- https://www.ig.com/en/news-and-trade-ideas/nvidia-takes-the-record-for-the-biggest-stock-market-gain-ever-240223
- https://www.benzinga.com/markets/equities/24/04/38024818/gmail-turns-20-if-you-invested-1000-when-google-went-public-20-years-ago-heres-how-much-youd-hav
- https://www.linkedin.com/pulse/why-charlie-mungers-net-worth-so-much-lower-than-warren-mahmood
- https://www.fidelity.ca/en/insights/articles/pull-money-out-stock-market/
- https://www.thestreet.com/investors/charlie-munger-net-worth-stock-and-investments
- https://finance.yahoo.com/news/4-most-popular-banks-millionaires-150054420.html
- https://www.nasdaq.com/articles/3-magnificent-seven-stocks-billionaires-are-selling-and-the-1-they-cant-stop-buying
- https://www.investopedia.com/articles/pf/09/avoid-five-recession-risks.asp
- https://www.mypivots.com/dictionary/definition/25/80-rule
- https://behindthebalancesheet.com/blog/does-your-portfolio-have-too-many-stocks/
- https://www.incrediblecharts.com/trading/2_percent_rule.php
- https://www.financialexpress.com/market/warren-buffetts-unhealthy-food-investments-that-will-make-health-fanatics-cringe-from-coke-to-burger-king-3149095/
- https://fortune.com/2024/01/16/worlds-first-trillionaire-inequality-oxfam/
- https://www.investopedia.com/financial-edge/1211/introducing-warren-buffetts-successor.aspx
- https://en.wikipedia.org/wiki/Bill_%26_Melinda_Gates_Foundation
- https://www.forbes.com/sites/qai/2022/08/24/is-it-true-that-cash-is-king-during-a-recession/
- https://forgeglobal.com/openai_stock/
- https://www.quora.com/What-bank-does-Bill-Gates-use-in-keeping-his-money
- https://www.fool.com/investing/2024/02/29/billionaire-bill-gates-portfolio-4-stocks/
- https://www.businessinsider.com/personal-finance/is-money-safe-in-bank-during-recession
- https://www.bankrate.com/investing/should-you-buy-stocks-during-a-recession/
- https://www.forbes.com/advisor/investing/best-recession-stocks/
- https://www.thestreet.com/personalities/bill-gates-net-worth-exactly-how-much-of-his-wealth-has-he-given-away
- https://dailyinvestor.com/investing/44342/bill-gates-foundation-dumps-apple-and-50-other-companies/
- https://www.investopedia.com/articles/personal-finance/121815/buffetts-9010-asset-allocation-sound.asp
- https://fortune.com/2024/04/15/bill-gates-sells-mansion-in-seattle-suburb/
- https://en.wikipedia.org/wiki/Rivian_R1T
- https://www.nasdaq.com/articles/these-are-the-6-bank-stocks-in-warren-buffetts-portfolio%3A-should-you-invest
- https://www.quora.com/Do-you-feel-bad-for-Warren-Buffet-s-kids-because-they-re-only-inheriting-1-of-his-net-worth
- https://www.tipranks.com/stocks/rivn/ownership
- https://ktvz.com/stacker-news/2023/10/27/elegance-vs-extravagance-what-do-biden-and-trumps-car-collections-say-about-these-very-different-leaders/
- https://www.linkedin.com/pulse/jeff-bezos-investor-google-surprise-adwa-aldakheel-0q9yf
- https://www.investopedia.com/day-trading/best-time-day-week-month-trade-stocks/
- https://inshorts.com/en/news/warren-buffett-sells-his-last-walmart-shares-after-20-years-1542277375558
- https://www.fca.org.uk/investsmart/golden-rules-investing
- https://www.investopedia.com/articles/stocks/08/industries-thrive-on-recession.asp
- https://www.blackrock.com/us/individual/insights/taking-stock-quarterly-outlook
- https://finance.yahoo.com/news/charlie-munger-handed-over-family-190221478.html
- https://www.fool.com/investing/2024/03/18/bill-gates-artificial-intelligence-ai-stocks/
- https://en.wikipedia.org/wiki/Rivian
- https://www.fool.com/investing/2024/02/23/warren-buffett-doesnt-own-bitcoin-but-his-company/
- https://www.cnn.com/2024/01/16/tech/bill-gates-ai-gps-interview/index.html
- https://sentinel-aviation.com/blog/warren-buffet-on-his-private-jet-from-the-indefensible-to-the-indispensable/
- https://www.netnethunter.com/does-warren-buffett-drive-his-own-car
- https://www.morningstar.com/portfolios/best-investments-own-during-recession
- https://finance.yahoo.com/news/warren-buffetts-123-billion-fortune-180906203.html
- https://news.ycombinator.com/item?id=39297521
- https://www.hindustantimes.com/business/jeff-bezos-investment-in-perplexity-ai-startup-has-doubled-in-value-in-a-few-months-its-a-google-rival-101710143493830.html