It seems like every day you hear people talking about the upcoming recession
well it is uncertain when exactly the next recession will happen there is no
doubt that one is coming therefore in this video I will share with you exactly
how you should invest to protect yourself from a recession and if you're
new to the channel then hit the subscribe button below for more
life-changing content before we get into the exact investment strategy that will
have you in a better financial position than 99% of others when the recession
finally happens let's first go over some things you can do outside of investing
to ensure you are prepared for hard times in the economy similar to stock
investing where you are maximizing your gains limiting your risk the best thing
you can do to prepare for an economic downturn is to reduce the financial
risks that are present in your life so how do we do that in my opinion there
are three tenets of financial risk mitigation that must be in place before
you can face the recession with the first being a reduction in your debt in
the United States debt is a serious issue credit card debt alone totals more
than one trillion dollars and when you add in student and mortgage debt to that
number it only multiplies in fact the average
credit card debt per US household as of June 2019 was eight thousand three
hundred and ninety eight dollars which means that getting debt under control is
something most Americans should be doing now the reasons why you will want to
have reduced debt during times of economic turmoil are plentiful first if
you have dead and lose your draw because of the recession then paying debt or
interest payments will be that much harder and will only further increase
your debt load moreover having debt hanging over your head will add to the
financial stress you will bear as you start to see your investments decline
that is unless you use the investment strategy I will share later on in this
video the second way you can protect yourself heading into a recession is to
make sure you are covered with the right insurance things like your house car and
your life should definitely be insured heading into a recession as during these
hard times you may find yourself without the funds to replace them if an accident
were to happen some recommended coverage levels include the full replacement cost
of your house and 75% of the content within it $500,000 worth of car
insurance for liability and bodily injury and ten times your annual salary
in life insurance hovering proper coverage
will give you the peace of mind that if something happens you won't be on the
hook for the replacement cost of these assets or that your family will be taken
care of finally before heading into a recession you must have an emergency
fund set up well this type of financial backup should be in place whether or not
a recession is looming it's imperative that you have ample funds put away when
times are tough sadly most Americans have failed in the emergency funds
department in fact roughly 40% of Americans couldn't come up with $400
cash that they needed to respond to an unexpected emergency in their life now
you're probably asking yourself how much money should I be putting away in this
emergency fund general advice is to have three six months of living expenses put
aside but in my experience having a year's worth of money ready to access
neaby will give you the confidence that you could ride out just about any
financial challenge you face don't forget that this emergency fund must
include all living expenses like rent and car payments groceries and utilities
now that you've set up a solid financial base we can now move into how to invest
during a recession when preparing your recession-proof investment strategy
there are certain considerations to take into account the first is your
investment horizon or how long you expect to keep your money in the market
if you're young then more likely than not your portfolio will be able to
recover from any losses that may experience during the lowest points to
the recession for these types of investors there really isn't any need to
change your current investment strategy unless you have your money in companies
that may be put out of business if the economy crashes unfortunately not
everyone can be this lotsa days achill in the recession investment strategy in
fact the majority of investors need to change their approach when tough times
are ahead for instance there are many people that just cannot handle the
emotions of seeing their investments drop by 30 or 40 percent other investors
may be retiring in the next few years and are relying on their current
portfolio value to sustain them through their later years in short each investor
has different needs but surviving an economic recession can be achieved by
anyone by investing in the right types of funds so what funds should you be
investing in the following five types of investments will be sure to help fight
the market decline best during times of recession
fun number one health care stocks whether the economy is booming or
busting people's health will always be a top priority which is why holding stocks
incredible health care funds is recommended as part of your recession
investment plan think about it like this someone who needs to take blood pressure
medication isn't going to stop taking a pill that keeps them alive just because
their stock dipped 20% which means that putting your money in companies that
offer these products is a safe bet to add to this fact many people have
medical coverage through their work meaning that buying these medical
products and supplies isn't even coming out of their pockets so spending on
drugs and supplies is unlikely to be discontinued a good example of just how
solid health care companies can be in times of economic turmoil is Johnson &
Johnson during the 2008 recession companies were seeing all-time lows in
their valuations with many of them dropping more than 50 percent in value
but this medical device company due to its positioning in the healthcare field
experienced only a 7% drop in share price and kept paying out dividends even
in these hard financial times therefore healthcare stocks should be
part of your recession proofing strategy fund number 2 utility stocks similar to
health care products whether the economy is doing well or not people need to keep
the lights on in their homes this means that companies supplying this
core service will continue to earn steady income and experience less of a
hit from the market decline in fact when asked to choose between losing their
electricity and missing a medical bill payment most people felt that giving up
their power was a much dire consequence making utility stocks probably a safer
investment than health care funds another reason to hold utility stocks
during a recession is that many of the best utility stocks pay dividends for
instance Duke Energy Corp is an annual dividend of 4 percent and its dividend
yields continues to grow year-over-year dividend yielding stocks are important
to have during a recession because the income they can provide will offset any
declines in price that they experience and can supplement your cash position if
money becomes tight fund number 3 high dividend stocks let's face it not every
stock is going to experience significant price increases over time and they
certainly won't during a recession which is why a lot of the value of a stock
clients and its dividend yield if you're unfamiliar with
what a dividend is it is commonly defined as a sum of money paid regularly
by a company to a chair holders out of its profits in short it's a company
rewarding you for being a shareholder and receiving dividends is important
during a recession it can be easy to get discouraged with your investment
portfolio when your fund values decline but seeing a consistent dividend coming
in on a quarterly or annual basis helps ease the pain again as I previously
mentioned utility stocks as well as real estate investment trusts are great
options when looking to recession-proof your investment strategy just be careful
when looking into high dividend yielding companies oftentimes companies will try
and lure in investments because they offer a larger than normal dividend
yields but their financial position is less than stellar making them a prime
target for financial turmoil especially when the markets begin to decline fund
number four investment properties moving away from the stock market rental
properties make for excellent investments during a recession now as we
saw in 2008 and other recessionary periods house values are not amenable to
price drops but with that being said a lot of aspects of this type of
investment make it almost totally recession proof first people will always
need a place to live so whether the markets are soaring or bottoming out if
you're a landlord then chances are high that you will still have a tenant
willing to pay you rent every single month even during the
recession and these rent payments are another fantastic element of owning
rental property for instance if your salary plateaus or you lose your job you
will still have a secondary stream of income to help pay the bills while you
try and get back on your feet finally owning rental properties is beneficial
beyond just recessionary periods based on historical studies worldwide Houston
returns from the year 1870 to 2015 were six point nine percent after inflation
meaning that this form of investment will continue to make you money year
after year fun number five government bonds another strong investment option
for tough economic times are government bonds while the market may struggle the
government is never going to collapse nor will it default on its debt meeting
that your investment is in a very safe position US Treasury bonds are the most
popular form of government bond and this is due to a few reasons
first the United States economy is very durable meaning that it will always
bounce back from the financial challenges it faces
moreover historically in times recession global capital tends to find its way
into companies and government related investment vehicles making the US dollar
rise in value and in turn local investments another benefit is stocking
up on bonds in preparation for a recession is how interest rates react to
times of low financial performance typically in a recession interest rates
decline as the government tries to spark the economy by allowing people to borrow
at cheaper rates as interest rates drop so do bond yields and this causes the
value your bonds to go up so while everyone is watching their portfolios
crush you'll be sitting pretty with your wise investment in government bonds now
the previous five types of funds are great ways to recession-proof your
investments and investing in them we'll have you ahead of 99% of the population
when the recession takes place but there was one other option to consider which
is to get out of the market completely when a recession is looming many people
feel most comfortable by selling off their investments in holding a portfolio
value in cash for the uneducated investor this would seem like a way to
avoid any form a portfolio to climb but the seasoned investor knows that this
isn't the case you see holding your money in a savings account or other low
yielding accounts means that you are making no money but beyond making no
money you were absolutely losing money due to inflation as of June 2019
inflation in the United States was 1.7 percent this means that if you had
$100,000 sitting in your bank after a year your buying power with this money
would now be 98 thousand three hundred dollars well it sucks to be losing money
this way how investors should see it is that they are controlling their loss
rather than risking losing tens of percentage points instead when the
market slides into a depressed state therefore by reducing the financial
risks in your life assessing your risk tolerance for a recession investing and
putting your money into the funds I have previously mentioned you will be ready
to face any economic challenges that are coming your way thanks for watching if
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