Value Stocks, Defensive stocks, Gold, Bonds, Commodities. Basically any asset that is less volatile than the market (S&P 500 as a benchmark).
Utilities, telecoms, insurance companies, consumer staples, fast food chains, and sometimes banks tend to be the best investments during recessions. Maybe oil and gas as well.
That suggests focusing on low-volatility stocks or a portfolio of bonds and other fixed-income instruments. Younger investors might invest for long-term growth because they have many years to make up for any losses due to bear markets.
Do you lose all the money if the stock market crashes? No, a stock market crash only indicates a fall in prices where a majority of investors face losses but do not completely lose all the money. The money is lost only when the positions are sold during or after the crash.
“One way to limit the impact of a market downturn is to diversify a U.S. stock portfolio with other kinds of investments, including international stocks; longer-term, high-quality bonds like treasurys and high-grade corporate and municipal bonds; and other assets,” says Matthew Diczok, head of Fixed Income Strategy, ...
Defensive stocks—such as those in the consumer staples, utilities, and healthcare sectors—tend to perform better during economic downturns and market corrections. These companies provide essential goods and services, making them less vulnerable to shifts in economic conditions.
Key Takeaways. While holding or moving to cash might feel good mentally and help avoid short-term stock market volatility, it is unlikely to be wise over the long term. Once you cash out a stock that's dropped in price, you move from a paper loss to an actual loss.
What are the best investments during a stock market? Some investments that may provide positive returns during a stock market crash can include safe-havens such as gold and the US dollar. Companies related to consumer staples also tend to rise in value, such as utility, food or pharmaceutical stocks.
Seek Out Core Sector Stocks
If you want to insulate yourself during a recession partly with stocks, consider investing in the healthcare, utilities and consumer goods sectors. People are still going to spend money on medical care, household items, electricity and food, regardless of the state of the economy.
The S&P 500 took almost six years to fully recover from the crashes of 2000 (the dot-com bubble) and 2008 (the global financial crisis).
The industries known to fare better during recessions are generally those that supply the population with essentials we can't live without. They include utilities, healthcare, consumer staples, and, in some pundits' opinions, maybe even technology.
Do you owe money if a stock goes negative? No, you will not owe money on a stock unless you are using leverage, such as shorts, margin trading, etc., to trade.
The 1929 crash lasted until 1932, resulting in the Great Depression, a time in which stocks lost nearly 90% of their value. The Dow didn't recover its pre-crash value until November 1954.
Avoid becoming a co-signer on a loan, taking out an adjustable-rate mortgage (ARM), or taking on new debt. Don't quit your job if you aren't prepared for a long search for a new one. If you own your own business, consider postponing spending on capital improvements and taking on new debt until the recovery has begun.
Fixed Income and Treasurys
Seeking fixed-income safe havens, particularly U.S. Treasury securities, is a fundamental way to protect your investments from market downturns. Treasurys are considered to be virtually risk-free because they're backed by the full faith and credit of the U.S. government.
Liquidity is crucial in uncertain times. “I've seen people struggle during a recession because their assets were too tied up in investments. This is why I suggest keeping some of your money in cash or in easily liquidated instruments like Treasury bills,” Kovar said.