In times like this when the market gets awry, you might worry about your investments losing value. While almost every sector of the market is experiencing a downturn, here are asset classes that tend to rise when the markets suffer or remain steady.
Even though bond and fixed income prices fall during recessions, their guaranteed interest payment does not change, which means the yield actually becomes larger. This makes for a profitable investment even in a recession.
Residential and rental properties
Housing is an essential good and people always need a place to live so even during recessions, this asset class holds up well and continues to generate rental returns even though recessions.
Small Cap Value Stocks
These are small companies with profits, cash-flow, strong earnings power and growth but due to the downturn, their stocks are sold down with the rest of the market. They tend to bounce back and deliver the strongest returns.
These are private businesses. They tend to have high margins, have the ability to borrow cheaply and can leverage their internal cash-flow to keep their business going.
When some investment grade bonds and credit instruments are oversold due to market downturn or businesses are in a cash crunch due to liquidity issues, it creates the opportunity to buy them for a fraction of their value. this tends to pay off handsomely during recovery.
Which of these would you love to invest in? Tell us in the comments below.
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