Pounded by increasing inflation and slowing growth, major economies – including the US and the UK – are staring at recession. As traditional financial instruments – be it fixed-return instruments like bonds or market-linked instruments like shares – get affected by the economic downturns, the overall portfolio return of an investor may also get hit hard.
So, to protect their portfolio from the ill effects of the probable global recession, investors need to search for the investment options that don’t get affected or get least affected by economic downturns.
Here are two of such investment options:
Gold acts as a hedge during economic and market downturn as investors take refuge by shifting their investments from the traditional financial instruments to the safety of the precious metal.
While investments may be done in physical gold – like gold jewellery, gold bars, coins etc – it’s advised to invest in paper or digital gold – like gold ETF, gold funds, Sovereign Gold Bond (SGB), digital gold, etc.
This is because an investor needs to spend money in hiring lockers, taking insurance etc in keeping physical gold safe in their custody. Moreover, at the time of reselling gold jewelleries, investors need to forego the amount paid for making charges, taxes at the time of buying.
On the other hand, apart from paying no money on safety of gold, people investing in instruments like SGB also get interest on the amount invested.
Commercial Real Estate
Another recession-proof investment avenue is commercial real estate (CRE), which generally remain stable during economic downturns and also provide high return.
However, investments in real estate – especially in CRE – need huge amounts of money and such investments are also quite illiquid. Moreover, the quality of CRE is also vital to get high returns.
To overcome such issues, it’s better to invest through options like Real Estate Investment Trusts (REITS), Infrastructure Investment Trusts (InvITs), fractional investments etc. This is because apart from investing in small amounts, the quality of assets will also be taken care of by the professional investment managers of such organisations.