Investing During a Recession

The term recession may be terrifying to hear — especially when we now know that Canada is officially in one. It can feel like the only investment option during a recession is to sell and hang onto everything you’ve got.

However, you may not realize that there are opportunities for investing during a recession if you know how to reduce volatility in a volatile market. 

Before considering investing during a recession, make sure you: 

• have the risk tolerance to handle the volatility characteristic of a recession.
• have enough savings set aside to manage your expenses and bills for three to six months.
• have time on your side and won’t need to touch your investments for at least seven years.

 

If these three things are true, here are some of the best practices when approaching investing during a recession. 

 

1. Diversify, Diversify, Diversify

 

Having a diversified investment portfolio is one of the most critical ways to protect yourself. Most industries in Canada are currently affected by the global COVID-19 pandemic, which may make you feel like diversifying across a variety of sectors doesn’t have the same protection. However, diversification is still the best way to keep your investment strategy smart and safe. 

Pro tip: in some situations, look for alternative investment options and local alternative investment options that may be less affected by volatile global markets and trade.

 

2. Don’t Scrap Your Current Strategy

 

Now’s not the time to pull out your investments in other areas for a low performing stock you “feel” will rebound. A recession is not the time to sell and hoard. It’s also not the time to try a completely new and unfamiliar strategy. 

 

3. Look at Debt-Secured Investments

 

We’ve talked about the difference between debt and equity-based investment. Debt-based funds are more secure across the board as your capital comes from the interest in the form of a loan.

There’s always more security for investors with debt-based investments. This is because borrowers still need to pay back their loans even if their industry or business isn’t performing. 

The benefit of mortgage-based investing is that should a borrower default, the investor can use the property to recoup a portion or all of their original investment. This kind of investment option allows for more security and reduced volatility. 

If you’re looking to grow your future investment capital during a recession, the team at Cooper Pacific can help you invest in MICs. Get in touch with Jordan on our team today to learn more.