Surviving a recession: the best funds to invest in (2024)

The rapid and severe impact of the coronavirus pandemic and the restrictive measures to manage it have severely depressed the global economy. The baseline forecast from the World Bank predicts the greatest global recession in eight decades, with a 5.2 per cent decline in the global gross domestic product (GDP) in 2020 when the pandemic started.

Investment funds were not spared from the damage brought by the global health crisis. These vehicles play a significant role in the global financing of the real economy and other financial institutions. Fortunately, investment funds survived the market upheaval that began in March 2020.

Still, investors are still constantly concerned about declining stock prices and how they may affect their portfolios whenthe economy approaches a recession. Out of concern for impending drops and escalating losses, investors flee stock funds in search of safety by turning to bond funds.

In this blog, we will discuss the types of investment funds that are traditionally more resistant during challenging economic conditions like recessions.

Surviving a recession: the best funds to invest in (1)

Types of funds that will do well during a recession

No company or industry is totally immune to an economic crisis, thus there is no such thing as a “recession-proof” investment fund. Additionally, markets can be unpredictable at any time, but certain stocks, funds and strategies may be able to assist your portfolio to perform better during a recession.

If you are looking for investments that can withstand a downturn to lower risk in your portfolio, here are the types of funds that will do well in a recession:

Hedge Funds

Hedge funds are a good choice if you desire higher risk with a chance of higher returns. Hedge funds don’t simply focus on booming bull markets; they try to generate money in all markets. They combine various advanced strategies like arbitrage, hedging, futures and options contracts, shorting particular equities and other complex techniques.

However, before you invest any money in hedge funds, ensure that you understand how they operate as well as the associated dangers. Beware that hedge funds have high expense ratios due to their active management.

Low-Volatility Funds

Risk is measured by volatility, and funds with low volatility are created to fluctuate less in response to market conditions. They frequently have lesser returns, but that’s what you get when you go for low risk.

These funds often search an index or market for the least volatile funds before investing. This means that they include a wide variety of stock types, including companies in utilities and the healthcare industry.

Additionally, some low-volatility funds look for equities that have little correlation to one another. As a result, the fund becomes more varied and has more exposure to other industries.

Exchange Traded Funds (ETFs)

A collection of investments like stocks or bonds is referred to as an exchange-traded fund or ETF. ETFs enable you to make many simultaneous investments in assets, and they frequently have cheaper costs than other types of funds.

Buying individual stocks can be a better choice if you focus on generating above-average returns. Given the high likelihood of their recovery from any crisis, ETFs are one of the safest investments during a recession.

A fund is frequently safer to own than a single stock because of the benefits of diversification that ETFs offer, including lower risk and less volatility.

Index Funds

A specific market index is tracked or replicated by an index fund, a type of mutual fund. You may develop a diverse portfolio with this form of investing that is generally interactive and generates respectable returns.

Because market fluctuations are typically less volatile across an index than they are for individual equities, index funds can help investors balance the risk in their portfolios.

Dividend Funds

Despite the common misconception that the stock market is a source of growth, there are other ways to profit from the market than share price increase. For instance, mutual funds that prioritise dividends might offer solid returns with lower volatility than funds that only focus on growth.

Many investors look to dividend stocks as a reliable source of market gains when inflation is high. Furthermore, the fact that dividend-stock funds have survived most recessionary times strengthens the argument that they can be a good addition to a portfolio.

Bond Funds

Bonds, particularly government bonds, are viewed as safe haven securities with a very low default risk. With a minimal necessary commitment, bond funds offer investors immediate diversification. Bonds are known for being low-risk and low-return investments that help balance a high-risk portfolio.

Money Market Funds

Money market funds can protect your assets during a recession, but only as a temporary fix and not for long-term growth. In times of economic uncertainty, money market funds offer liquidity for cash reserves that can help you build your portfolio.

Money market funds make investments in short-term, comparatively safe securities that mature in about 13 months on average.

How can fund administrators help fund managers and investments during a recession?

To launch your funds during a recession, you need the ideal resources and assistance. A fund administrator is a crucial partner in charge of monitoring and assessing the financial performance of the fund.

A fund administrator digs deep into your finances and often seeks to improve fund management. They are accountable for developing a strategic investment plan that balances your risk appetite with your financial objectives, managing your reserves and ensuring that you consistently make the best financial decisions. In addition, fund administrators can help fund managers to diversify their portfolios during a recession by introducing various types of investments.

Partnering with Bolder Group

In times of recession, it is essential to have a trusted partner who can handle the situation better and provide solutions to survive an economic challenge. As an independent global organisation, Bolder Group’s fund industry experts offer specialised services to clients.

Ready to take the first step towards being recession-proof? Contact our team today or visit our office near you.

Surviving a recession: the best funds to invest in (2)
Surviving a recession: the best funds to invest in (2024)


What fund to invest in during a recession? ›

During a recession, investing in cash and cash equivalents becomes a strategic choice for investors who are hoping to preserve their capital and maintain liquidity. Cash equivalents include short-term, highly liquid assets with minimal risk, such as Treasury bills, money market funds and certificates of deposit.

Where is the safest 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 stocks are best to invest in 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.

What is the best thing to do with money in a recession? ›

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 not to invest in during a recession? ›

Most stocks and high-yield bonds tend to lose value in a recession, while lower-risk assets—such as gold and U.S. Treasuries—tend to appreciate.

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

Cash, large-cap stocks and gold can be good investments during a recession. Stocks that tend to fluctuate with the economy and cryptocurrencies can be unstable during a recession.

How to build wealth during a recession? ›

Recessions can also push you to reexamine your finances, develop passive income streams, and consult financial advisers to make sure your assets are safe.
  1. Cut living expenses. ...
  2. Build an emergency fund. ...
  3. Develop new skills. ...
  4. Speak with a financial adviser. ...
  5. Create passive income sources. ...
  6. Start a business. ...
  7. Consumer staples. ...
  8. Bonds.
Jan 5, 2024

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.

How do you not lose money in a recession? ›

Build up your emergency fund, pay off your high interest debt, do what you can to live within your means, diversify your investments, invest for the long term, be honest with yourself about your risk tolerance, and keep an eye on your credit score.

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.

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.

Can banks seize your money if the economy fails? ›

The short answer is no. Banks cannot take your money without your permission, at least not legally. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per account holder, per bank. If the bank fails, you will return your money to the insured limit.

What not to do during recession or depression? ›

Increasing your debt

Even though recessions may lower interest rates on personal loans, avoid taking on more debt. Instead, put your energy and money toward paying off your existing debts.

What type of mutual fund is best during recession? ›

  1. Federal Bond Funds. Several types of bond funds are particularly popular with risk-averse investors. ...
  2. Municipal Bond Funds. Next on the list are municipal bond funds. ...
  3. Taxable Corporate Funds. ...
  4. Money Market Funds. ...
  5. Dividend Funds. ...
  6. Utilities Mutual Funds. ...
  7. Large-Cap Funds. ...
  8. Hedge and Other Funds.

Should you buy ETFs during a recession? ›

Investors looking to weather a recession can use exchange-traded funds (ETFs) as one way to reduce risk through diversification. ETFs that specialize in consumer staples and non-cyclicals outperformed the broader market during the Great Recession and are likely to persevere in future downturns.

What is the best Vanguard fund in a recession? ›

The Vanguard Health Care ETF (VHT, $245.85) is tops among all bear market ETFs period, and it's certainly one of the safest Vanguard funds to put to use in a bear market.

Is it good to invest in mutual funds during a recession? ›

A stock fund, either an ETF or a mutual fund, is a great way to invest during a recession. A fund tends to be less volatile than a portfolio of a few stocks, and investors are wagering less on any single stock than they are on the economy's return and a rise in market sentiment.


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