Kavan Choksi Lists Some of The Best Investments to Hold in A Recession

A recession implies to a widespread economic downturn that tends to last more than just a few months. As per Kavan Choksi, the slowing economy often leaves companies with less need to make goods and provide services, which can lead to hiring freezes and layoffs. People who are out of work generally lower their spending, which further slows down the economy. Predicting when a recession may come is not an easy task. Moreover, many investors usually react before a recession begins, which may make the situation worse.

Kavan Choksi underlines certain recession proof investments 

Something that is “recession-proof” is unlikely to be majorly impacted by the effects of a recession. Even though this term is most commonly used for describing jobs, the term can also apply to investments. These include specific industries, sectors and companies that are relatively more resilient during times of economic hardship.

Here are some of the best investments to hold in a recession:

• Cash: Cash is among the most important assets to have during a recession. It would be quite helpful to have an emergency fund to tap into when one needs extra cash. This would allow people to let their investments ride out market lows and capitalize on long-term growth. Ideally, an emergency fund must cover about three to six months of living expenses. This should may include rent, utilities, food, medications, as well as minimum debt payments. It would be particularly a smart move to keep emergency fund in a high-yield savings account insured by the Federal Deposit Insurance Corp.

• Large-cap stocks: Stocks of major, well-run companies that are highly valued usually perform well even during recessions. Companies that produce products consumers purchase no matter the economic environment tend to do especially well because individuals continue buying their offerings. Hence, it would be smart to focus on stocks of companies offering food, personal care products, health care and utilities. After all, people will need to eat, go to the doctor, take a bath and more, no matter whether the economy is strong or weak. 

• Gold: The value of gold has at times increased during recessions historically. It is common for many investors to flock to gold when stocks and bonds decline, as it can be a prudent investment choice during times of economic turmoil. Gold is considered a store of value that retains purchasing power when fiat currencies lose value, and is often viewed as a hedge against financial uncertainty and market volatility.

• REITs: Real estate investment trusts (REITs) are companies that own, operate, or finance income-producing properties. REITs pay out most of their income as dividends. Hence, they are an attractive option for income-focused investors.

As per Kavan Choksi, diversification is very important to lower the blow of financial losses during a recession. Distinctive asset classes tend to perform differently during phases of the economic cycle. When stocks are down, bonds may perform well. In a similar manner, certain stock sectors usually experience less volatility than others during a recession. Basically, diversification can help investors to limit losses to any single part of the portfolio. They might even notice that some of the assets see positive growth during a recession.