The stock market experienced significant turbulence at the beginning of the Coronavirus pandemic and continues to drop as the economic impact continues to grow. The Coronavirus is what is known as a Black Swan event. Black swans are rare, but they do exist, and the term has come to symbolize economic events that are rare and impossible to predict. As the news continues to report gloom and doom in the economic sector, many investors sell-off their stocks in an attempt to stave off dramatic losses. Keeping your money in cash during an economic downturn is almost always a bad idea. There is money to be made if you are willing to accept some risks and invest wisely.
5 Investments to make money during a recession
- Real-estate—a housing market collapse is a great time for real estate investors. Prices drop, and the market is oversaturated, meaning you can often find property for far below its appraised value. You can then turn your investment into a rental property to generate income, and sell when the market is on an upswing.
- Invest in dividend stocks that performed well during prior economic slowdowns. Dividend stocks generate passive income, and if you buy during a recession when the price is low, they will increase in value when the market rebounds.
- Consider investing in healthcare. With an aging baby boomer generation and technology driving healthcare advances, stocks in this sector will be resistant to wild swings in the market.
- Precious metals increase in value during times of economic uncertainty. Timing is essential, as you need to buy in at the first sign of financial trouble, as the price will continue to climb the longer and deeper the recession becomes.
- Pay attention to companies with a low debt ratio whose stocks are bottoming out. If the company deals in goods or services that are likely to withstand the recession, then buy low and sell high.
Things to consider about investing during a recession
Investing money during a recession requires that you avoid the prevailing panic and choose ways to diversify your portfolio so that you can still make money. The adage of “what goes up must come down” works in reverse as well when talking about investing. No matter how bad the economic forecast looks, there will be another bull market, and those who invested when prices were low will reap the rewards when they start to soar again. Your retirement portfolio should be adjusted as you approach retirement age. Younger people, with a decade or more before retirement, can tolerate higher risk. Those who are approaching retirement age need to make sure their retirement portfolio is balanced toward investments that still offer some returns, but are less risky if the market turns sour. The first step to a sound investment strategy is to know your risk profile. You should always have enough cash in a high yield savings account to see you through paying your expenses and living for six months. The six-month cushion should not be invested, because you need easy access to this money. Once you have reached this point, you need a medium and long-term investment strategy. The money you invest in long-term goals includes your retirement savings. Whatever is left over is what you can afford to invest to meet medium length goals such as educating your children, buying a second home, or just for the pleasure of making money. These funds are what you should be investing in during the Coronavirus or any other recession.
Ways to make money during the recession
For creative thinkers, there are numerous ways to make money during a recession. The current recession, brought about by a pandemic, offers some unique ways to earn money.
- Establish a delivery and errand service catering to the needs of those who are most vulnerable to the virus. Charge a reasonable fee to run errands, pick up prescriptions, or to make a quick dash to the corner store. You will be earning money while providing a valuable service to those who need it. Advertise on neighborhood apps, social media, and word of mouth.
- As the unemployment numbers continue to soar, people will be searching for new jobs. To enhance their marketability, they will want to learn new skills. Consider setting up online classes to teach specific skills. Make a list of the skills you have, and determine which ones would have the highest market value for those seeking employment. Technology makes it easy to set up, and your only significant investment would be your time.