What to Invest in During a Recession: 4 Ideas - NerdWallet (2024)

MORE LIKE THISInvestingStocks

Investing in a recession can be frightening, but it doesn’t have to be unnerving — if you know what to look for.


Charles Schwab
Interactive Brokers IBKR Lite
J.P. Morgan Self-Directed Investing

NerdWallet rating


NerdWallet rating


NerdWallet rating




per online equity trade



per trade



per trade

Account minimum


Account minimum


Account minimum




no promotion available at this time



no promotion available at this time


Get up to $700

when you open and fund a J.P. Morgan Self-Directed Investing account with qualifying new money.

Learn More
Learn More
Learn More

Invest based on your goals

Choosing what to invest in during a recession will first require you to consider your personal goals. Are you looking to:

  • Minimize the risks of stock market volatility?

  • Maximize long-term returns?

  • Create a source of fixed income?

  • Invest in the stock market while prices are low (also known as buying the dip)?

Building a portfolio that incorporates all of these strategies may be ideal, but successfully tackling any of them could have a significant positive impact on your financial future.

🤓Nerdy Tip

For long-term investors, a market downturn can simply mean stocks and other investments are on sale. If you're not already investing, you can take advantage with one of our picks for the best investment accounts.

Are we in a recession?

The National Bureau of Economic Research, which is the official "scorekeeper" of U.S. recessions, defines a recession as "a significant decline in economic activity that is spread across the economy and that lasts more than a few months."

The bureau uses a variety of measures, such as personal income, employment and industrial production, to gauge recessions. It has not announced the beginning of a new recession since 2020.

What happens during a recession?

Typically, recessions occur after periods of economic growth. Several factors can cause recessions, including inflation, political unrest and reduced spending.

Some recessions are mild while others are severe. Often, the things that happen during a recession are not positive: Job loss, rising unemployment and production drops often accompany recessions.

4 investments to consider during a recession

While no investment is guaranteed to be recession-proof, some tend to perform better than others during downturns. These include:

  1. Health care and consumer staples stocks

  2. Large-cap stocks

  3. Funds that track specific sectors

  4. Fixed-income investments

Learn more about each specific type below.

1. Health care and consumer staples stocks

Companies that sell their shares on the stock market are broken into sectors. Sectors are groupings that pertain to the type of business the company engages in, and there are 11 sectors in total:

  1. Communication services.

  2. Consumer discretionary.

  3. Consumer staples.

  4. Energy.

  5. Financials.

  6. Health care.

  7. Industrials.

  8. Information technology.

  9. Materials.

  10. Real estate.

  11. Utilities.

During a recession, some sectors of the economy tend to outperform others as consumer needs shift. Delia Fernandez, a certified financial planner and owner of Fernandez Financial Advisory in Los Alamitos, California, says both the health care and consumer staples sectors are examples of this.

A 2021 study titled "Is Healthcare Employment Resilient and 'Recession Proof'" found health-care hiring remained stable in spite of economic downturns.

The health-care sector includes biotech and pharmaceutical companies. The consumer staples sector includes food and beverages, household and personal products and even alcohol and tobacco.

» Don’t have a brokerage yet? See our picks for the best online brokerages

These sectors typically don’t see the rapid growth that others, such as consumer discretionary (household goods and services that are considered more wants than needs, such as apparel, restaurants and luxury items) or information technology, might see in the rebound and recovery phase of a recession.

“In any downturn environment, we often look at consumer staples. And those are the usuals, the groceries we buy and the stores we buy them from,” says Fernandez. “Because no matter what, you’re buying toilet paper, eventually you’re going to go to the doctor, you’ve got to eat, you’ve got to drink.”

These stocks, considered “defensive stocks,” may not be as attractive during boom periods like a bull market. But bear markets and recessions may be the time to reassess and consider the companies that sell items everyone buys, no matter the outside circ*mstances, Fernandez says.

» Learn more about what a recession is.

2. Healthy large-cap stocks

If you’re interested in investing in individual stocks during a recession, you might consider options in the sectors outlined above. But that’s not the only criteria: Low debt, profitability, strong balance sheets and positive cash flow may all help a company get through difficult economic times.

“You’re going to look at the big guys that are going to get through this downturn and thrive and thrive,” Fernandez says.

So how do you identify those companies? One of the best places to start is to use a free stock screener. If you already have a brokerage account, this is most likely available on the broker’s website.

» Don’t have a brokerage yet? See our picks for the best online brokerages

Here are some sample criteria you could put in your stock screener:

  1. Set the market capitalization to “large cap” or larger. Large-cap stocks are shares of some of the largest companies in the U.S., generally with valuations of $10 billion or more. These companies tend to be more stable during volatility and have a lower risk of going out of business.

  2. Set the price performance. This is how you’ll find individual stocks that have performed better than the market overall. First, you’ll need to determine the performance of a broad market index, such as the , for a specified period. To find stocks that have performed better this year, set the price performance filter in your stock screener to show anything above the performance of the S&P 500 from the last year.

  3. Choose common stock. If you have the opportunity to filter for security type, select “common stock” to keep things simple.

  4. Select the sector. Here’s where you can input the consumer staples or health-care sectors discussed above (or any others you may want to look at).

You can also opt to filter for stocks with positive dividend growth. Increasing dividends consistently can be a sign of financial strength and discipline, healthy balance sheets and consistent cash flow — all factors that can help companies withstand recessions. Be aware that this filter will limit your options to only dividend stocks, but it should present some of the more established companies that may be better able to endure difficult market conditions.

This doesn’t mean these companies will always be strong in a recession. Remember that past performance doesn’t guarantee future results. But these are data points that might inform your eventual picks.

» Start investing: Learn how to invest in stocks.

Track your finances all in one place

Find ways to save more by tracking your income and net worth on NerdWallet.

Sign Up

What to Invest in During a Recession: 4 Ideas - NerdWallet (4)

3. Funds that track specific sectors

Investing in funds, such as exchange-traded funds and low-cost index funds, is often less risky than investing in individual stocks — something that might be especially attractive during a recession.

Investing in funds gives you exposure to specific baskets of securities, rather than just a single investment (such as an individual stock). In times of recession, this is one way to invest in several companies in the most resilient sectors while avoiding concentrating your risk in any one company.

If one company in the fund performs poorly, the strong performances of other companies can offset the losses of the underperformer.

“Most people aren’t stock pickers,” Fernandez says. “Most people are going to do better by buying an index of something and letting that index serve its purpose.”

» Want to get started with funds? Learn how to invest in index funds

4. Fixed-income and dividend-yielding investments

Investors typically flock to fixed-income investments (such as bonds) or dividend-yielding investments (such as dividend stocks) during recessions because they offer routine cash payments.

Dividend stocks are shares of a company that splits a portion of its profit with all its shareholders based on the number of shares each investor owns. Investing in companies with a strong track record of paying — and increasing — dividends can lead to stable cash flow even during recessions.

Another option is to invest in dividend ETFs, which are made up of companies known for routinely paying strong dividends.

And while these payments can be taken out as cash and used as income, there’s another factor that makes dividends more appealing during times of volatility, according to Marguerita Cheng, a CFP and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.

“The benefit of investing in dividend-paying stocks, mutual funds or ETFs is that the dividends can be reinvested. Even if the value of your stock is down because of the conditions, the reinvested dividends lower the volatility,” Cheng explains. “Let’s say the stock market is down 10%, but that stock you have pays a dividend of 3%. If that gets reinvested, you don’t experience as much downside.”

When searching for dividend-paying stocks or dividend-paying ETFs, it’s important to note that yield shouldn’t be the determining factor, as the highest yields tend to come with additional risk. Rather, look for consistency in paying or increasing dividends, which is indicative of good corporate governance.

» Want to get started? See our list of 25 high-dividend stocks and learn how to invest in them.

Bonds (and many bond funds) are similar in that they make periodic payments over time, but the mechanics are different.

Bonds, whether issued by the U.S. government or a corporation, are essentially a loan. You give a specific amount upfront to the company or government, and in return, you receive interest on that amount over a set period of time.

Plus, if you don’t sell the bond before it matures, at the end of the period you’ll get back the initial amount you invested. In some cases, you might also choose to sell the bond to another investor on the secondary market before its maturity date.

The differences between corporate and government bonds are explored in-depth in our list of low-risk investments.

Above all, don’t panic

Recessions and volatile markets can be frightening times, but if you’re investing for the long term, what’s most important is to keep an even keel. In many cases, the best thing to do may be nothing at all — to trust the market’s resilience and the diversification you’ve built into your long-term portfolio.

Neither the author nor editor held positions in the aforementioned investments at the time of publication.

What to Invest in During a Recession: 4 Ideas - NerdWallet (2024)


What should you buy in a recession to make money? ›

5 Things to Invest in When a Recession Hits
  • Seek Out Core Sector Stocks. During a recession, you might be inclined to give up on stocks, but experts say it's best not to flee equities completely. ...
  • Focus on Reliable Dividend Stocks. ...
  • Consider Buying Real Estate. ...
  • Purchase Precious Metal Investments. ...
  • “Invest” in Yourself.
Dec 9, 2023

What is the best asset to hold during a recession? ›

Still, here are seven types of investments that could position your portfolio for resilience if recession is on your mind:
  • Defensive sector stocks and funds.
  • Dividend-paying large-cap stocks.
  • Government bonds and top-rated corporate bonds.
  • Treasury bonds.
  • Gold.
  • Real estate.
  • Cash and cash equivalents.
Nov 30, 2023

What is the best stock to buy during a recession? ›

The best recession stocks include consumer staples, utilities and healthcare companies, all of which produce goods and services that consumers can't do without, no matter how bad the economy gets.

Where is the best place to put money in a recession? ›

Where to put money during a recession. Putting money in savings accounts, money market accounts, and CDs keeps your money safe in an FDIC-insured bank account (or NCUA-insured credit union account). Alternatively, invest in the stock market with a broker.

What not to buy during a recession? ›

During an economic downturn, it's crucial to control your spending. Try to avoid taking on new debt you don't need, like a house or car. Look critically at smaller expenses, too — there's no reason to keep paying for things you don't use.

What gets cheap during a recession? ›

Because a decline in disposable income affects prices, the prices of essentials, such as food and utilities, often stay the same. In contrast, things considered to be wants instead of needs, such as travel and entertainment, may be more likely to get cheaper.

Where is money safest during a recession? ›

You can keep money in a bank account during a recession and it will be safe through FDIC and NCUA deposit insurance. Up to $250,000 is secure in individual bank accounts and $500,000 is safe in joint bank accounts.

Is it better to have cash or property in a recession? ›

Cash: Offers liquidity, allowing you to cover expenses or seize investment opportunities. Property: Can provide rental income and potential long-term appreciation, but selling might be difficult during an economic downturn.

What stocks do worst in a recession? ›

Equity Sectors

On the negative side, energy and infrastructure stocks have been the hardest-hit in recent recessions. Companies in these sectors are acutely sensitive to swings in demand. Financials stocks also can suffer during recessions because of a rising default rate and shrinking net interest margins.

What stocks are not affected by market crash? ›

These include healthcare, consumer staples, utilities, and cost-conscious retail companies. Demand for the products and services provided by these companies tends to hold up relatively well during a recession. That should enable their stock prices to hold up or continue gaining value.

What sectors thrive in a recession? ›

There are also fundamental services that consumers can't do without, even in hard times.
  • Accountants. ...
  • Healthcare Providers. ...
  • Financial Advisors and Economists. ...
  • Auto Repair and Maintenance. ...
  • Home Maintenance Stores. ...
  • Home Staging Experts. ...
  • Rental Agents and Property Management Companies. ...
  • Grocery Stores.

What investments did well during the Great Depression? ›

The best performing investments during the Depression were government bonds (many corporations stopped paying interest on their bonds) and annuities.

How to become a millionaire during a recession? ›

3 Ways to Get Rich During a Recession
  1. Invest as much as you can. The easiest way to get rich during a recession is to invest as much money into the stock market as you can. ...
  2. Protect your income. Stable income is a key part of personal finance success, including building wealth. ...
  3. Cut back on expenses.
Jan 14, 2023

Can you lose money in a savings account during a recession? ›

It's safe from the stock market: If a recession causes short-term market volatility, you won't lose money on your high-yield savings deposits, unlike investing in the stock market.

How to make passive income in a recession? ›

Passive income ideas:
  1. Create a course.
  2. Write an e-book.
  3. Rental income.
  4. Affiliate marketing.
  5. Flip retail products.
  6. Sell photography online.
  7. Buy crowdfunded real estate.
  8. Peer-to-peer lending.
Mar 27, 2024

How to get rich during inflation? ›

Several asset classes perform well in inflationary environments. Tangible assets, like real estate and commodities, have historically been seen as inflation hedges. Some specialized securities can maintain a portfolio's buying power, including certain sector stocks, inflation-indexed bonds, and securitized debt.

How to thrive in a recession? ›

  1. Have an Emergency Fund.
  2. Live Within Your Means.
  3. Have Additional Income.
  4. Invest for the Long Term.
  5. Be Real About Risk Tolerance.
  6. Diversify Your Investments.
  7. Keep Your Credit Score High.
  8. Frequently Asked Questions.


Top Articles
Latest Posts
Article information

Author: Twana Towne Ret

Last Updated:

Views: 5313

Rating: 4.3 / 5 (44 voted)

Reviews: 91% of readers found this page helpful

Author information

Name: Twana Towne Ret

Birthday: 1994-03-19

Address: Apt. 990 97439 Corwin Motorway, Port Eliseoburgh, NM 99144-2618

Phone: +5958753152963

Job: National Specialist

Hobby: Kayaking, Photography, Skydiving, Embroidery, Leather crafting, Orienteering, Cooking

Introduction: My name is Twana Towne Ret, I am a famous, talented, joyous, perfect, powerful, inquisitive, lovely person who loves writing and wants to share my knowledge and understanding with you.