When a recession happens, investors often look for relatively safe places to park their hard-earned cash. However, “safer investments” is in the eye of the beholder, as a new survey suggests different generations would protect their money through different means.
Global trading platform eToro sought to determine how concerned investors were about the possibility of a recession and whether they had a contingency plan in place should one occur. To find out, they surveyed 1,000 online investors between the ages of 20 and 65 who reported that they either currently invest in stocks, cryptocurrency or Exchange Traded Funds (ETFs) or will do so within the next six months. ETFs are collections of stocks, bonds and other assets in a single fund.
Not only did more than two-thirds of respondents say they feared an upcoming recession, but many had come up with a recession-proof investment strategy. However, that strategy tended to vary by age.
Respondents from Generation X, those born between 1965-1979, tended to show an interest in investing in commodities, which are raw materials such as food, oil and gold. Of the Gen X respondents, 38% said commodities were the way to go in a recession. On the other hand, millennials, those born between 1980 and 1994, favored crypto assets, with 40% saying they would invest in cryptocurrencies such as Bitcoin. Respondents from Generation Z, born in 1995 or later, were partial to real estate, with 50% saying that would be their investment focus in a recession.
Investors also had other ideas about diversifying during a recession. Those who were most concerned about a recession being on the horizon were most interested in investment vehicles that offer high liquidity, or the ability to easily convert assets to cash. An overwhelming majority of that group of respondents (92%) said they were “very interested” in owning a fraction of assets such as artwork, businesses and landmark buildings. More specifically, 82% said they would be interested in owning a portion of landmark real estate, more than 80% said they’d be interested in owning a fraction of a local business and 68% said they would be interested in buying shares of music rights.
The fact that consumers would be seeking out more stable investments during a recession isn’t unusual, but thanks to technology, more options are accessible to investors at all experience levels, said Guy Hirsch, managing director of eToro U.S. in a press release. “Historically, these investment opportunities have been limited to high net worth and institutional investors, but innovation is unlocking these opportunities for everyday investors and clearly, these results indicate that the demand is there," Hirsch said.
No investment is 100% safe, but some carry more risk than others. For that reason, whether there is a recession or not, it’s always a good idea to diversify your portfolio. If you’re worried about a possible looming recession, take steps to strengthen your financial standing now. For example, you might pay off debt, cut back on excess spending and pad your savings account so you would be better able to handle tough times.