The United States is officially in a recession after a long period of growth. The coronavirus pandemic shut down millions of businesses and caused millions of Americans to lose their jobs, putting the economy into a swift and severe downturn. But just because we are in the midst of a financial crisis, it doesn’t necessarily mean you should stop investing.
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I spoke to a number of financial experts and business leaders to find out the best places to invest your money right now. If you have long-term goals and can hang on until the next upswing, consider investing in these areas.
Last updated: Dec. 28, 2020
Michael Gleason, CEO of ATM.com, recommends investing in technology at this time.
“Personally, I’m betting on tech more than ever, and I believe a good percentage of new customers acquired by firms based on COVID cocooning will stay,” he said. “Products like Slack and Twilio, for example, benefit from a work-from-home environment, as well as Amazon and Netflix.”
“Opportunities may exist in well-resourced and experienced distressed credit investment managers,” said Alex Hart, managing director at Pathstone. “These managers will have a larger opportunity set as overleverage or weaker businesses must restructure to survive.”
Don’t expect to see returns right away from investments in the travel sector, but it could pay off in the long run.
“If you have a higher risk tolerance and a longer investment timeline, the potential upsides of hard-hit equities can be significant,” said William Richards, founder and CEO of EasyRedir Inc. “In the case of the recent COVID crisis, travel-related companies have been hammered — and rightfully so. If you believe these industries will come back and you have time to wait for it, you can pick up these companies at significant discounts.”
“Domains, especially .com, are always a solid investment during a financial crisis,” said Adam Torkildson, founder of Small Business Sense. “Historically, the domain aftermarket has always been strong during every recession since domains were first available.”
“Real estate continues to be a solid investment strategy,” said Jason Powell, real estate and securities attorney at EstateInvesting.com. “The market has remained strong with prices continuing to grow, making it a good place to put your money for the long-term.”
Invest in companies that are helping us adjust to pandemic life, said John Rampton, founder of Calendar.
“Crowdfunding programs are a good way to help startups that are developing some innovative products and services to work and live in this new ‘normal,'” he said. “You get insight into what’s coming and who may become a candidate for an IPO by doing so. Plus, if you invest in equity crowdfunding programs, you can get a financial return for backing these startups as an investment.”
Local Small Businesses
“While it may not be the traditional investment you are thinking of, the best thing you can do is to continue investing in local small businesses,” said Chalmers Brown, CTO at Due. “By doing so, you may be keeping their doors open and you are putting money back into your local economy, giving it more life even in the wake of a financial crisis. Your return is in the form of bolstering your local economy, which can help you maintain your other investments like your home value.”
“For those doomsday preppers out there, the hard commodities like gold, silver and platinum become a sanctuary for many investors during crisis times,” said Anthony Denier, CEO at Webull investing.
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Denier also recommends investing in companies that produce consumer staples.
“Consumer staples have proven to be a safe haven during uncertain times as people still buy soap and toilet paper,” he said.
Healthcare and Biotech
“Healthcare and biotech companies tend to perform better during times of economic retraction given the nature of their inelastic businesses,” said Doug Heske, CEO at Newday investing. “We’ve already seen significant flows of capital into biotech, research and healthcare companies, and expect that the movement of capital will continue for the foreseeable future. As the human population grows from 7.5 billion to 11 billion by 2100, there will be additional strains placed on our ecosystems. We will need to develop new technologies that have a positive impact on people and planet, and healthcare and biotech will be an important sector both during and after the recession.”
“Agriculture investments are not correlated to the stock market, so even during market corrections, they can perform well,” said Chris Rawley, CEO of Harvest Returns, a platform for investing in agriculture. “Also, in times of a recession, food consumption continues, so companies that produce and process food can maintain their cash flows.”
Oil and Energy
If you’re willing to take on risk, investing in oil and energy could be a fruitful investment, said Barbara A. Friedberg, investment expert and owner of Robo-Advisor Pros.
“The recommendation assumes that eventually, world and U.S. economies will return to normal and that driving and oil consumption will pick up,” she said. “When that happens, the oil and energy companies should rebound. To play this scenario, you might invest in an oil and energy ETF like iShares Global Energy ETF (IXC). While down 35% year to date, when the economy picks up, I expect investors will profit from this investment. A caveat is that there may be more pain before a reversal.”
“I think that one of the better things to invest right now is self-storage,” said Alina Trigub, managing partner at SAMO Financial. “As the recession hits, typically people start losing their jobs and start downsizing, but rarely want to get rid of their belongings. That’s when the storage occupancy rates go up. With the unemployment being incredibly high these days, the downsizing will impact many people. And the trickle-down effect will in turn create additional opportunities to serve people looking to store their belongings for many years ahead.”
“While it’s not fully inflation-proof, investing in industries and assets that will continue to generate income — i.e. rentals — is a good way to receive a certain amount of predictable income stream, especially during the times when many assets are going to be suffering,” said James Richman, CEO and chief investment officer at JJ Richman. “While the value appreciation may be deferred during the recession, it is not necessarily as volatile as other asset classes.”
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Industries That Fall Within Your 'Circle of Competence'
Richman advises against investing in industries you don’t know much about, especially during volatile times.
“It’s much easier to understand industries that you’ve had exposure in as opposed to trying to decipher new and upcoming industries that you may not have exposure to or expertise in,” he said. “If your retirement is on the line, it’s best to leave the ‘speculation’ to the experts and focus on industries that you have a deeper understanding of so that you can easily follow the progress of your investments.”
Companies With Little or Manageable Debt
“Since the market sell-off, the stocks that have performed the best are companies that have a AAA rating for their debt, followed by stocks with an AA rating, an A rating, a BBB rating and so on,” said Matt Fox, CMT, founder and wealth advisor at Ithaca Wealth Management. “The worst-performing stocks are the ones that are saddled with debt and have had their businesses negatively impacted by the virus.”
“Focus on the leaders that can quickly adapt to the virus and haven’t seen their business or balance sheet decimated by COVID-19,” he continued. “Companies that come to mind are predominantly in the technology and healthcare sectors and include Microsoft, Apple, Adobe, Nvidia, Stryker and Merck.”
Dividend Stocks or Index Funds
“Right now, I believe investors should consider reducing their exposure to day-to-day trading volatility and focus on longer-term plays like dividend stocks or index funds,” said Milind Mehere, founder and CEO at Yieldstreet.
Your Retirement and Savings
Don’t forget to invest in yourself and your future before putting any funds elsewhere.
“It’s important to keep investing by putting money in retirement accounts, emergency funds and savings accounts,” said Jayson DeMers, founder of EmailAnalytics. “That money is still making a return on these interest-bearing accounts. It might be small amounts during a financial crisis, but it is better than spending it or not investing.”
No matter where you choose to invest during this recession, it’s important to spread your investments across a number of different assets and areas.
“Continue to diversify across stocks and other investment vehicles so you can manage your risk through what can be a volatile period in the midst of a financial crisis,” said Steve Gickling, founder of ETLrobot. “This will help you balance out the volatility. Even if you experience some losses, some of the more conservative investments in your portfolio can absorb that downturn.”
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Gabrielle Olya contributed to the reporting for this article.