How and where to invest for recession proof bets? | Jobs Vox


The rise in global inflation was caused by geopolitical tensions in the wake of the Russia-Ukraine war, which has pushed up the prices of food and energy commodities. After that, the US Federal Reserve began a rate hike cycle. That has raised fears of a global recession, driven by sluggish growth in major economies and rising inflation, with the UK hitting a 41-year high. In the year A recession in 2023. We spoke to our industry experts about how investors can make recession-proof investments as the risk of a global recession increases as central banks raise interest rates amid a battle against high inflation.

Investment options that are less or less affected by economic downturns

Mr. Bavin Patel, Co-Founder and CEO, Lenden Club said, “Investment instruments that are less affected by economic downturns are stable asset classes such as gold, bonds and fixed/debt instruments. But some of these may not be attractive in return. On the other hand, new-age asset classes such as peer-to-peer (P2P) lending or fixed income instruments have emerged as non-market-linked options with good returns. So these are profitable investment options.

Although all investment options are subject to some degree of volatility and risk, market-related asset classes can be affected by any type of economic crisis or downturn. Real estate is inherently a stable asset class and is not directly marketed, making it a bit safer. Commercial real estate is one of the most stable and promising asset classes, showing a decade-long growth in demand and performance. Also, increasing demand for Indian real estate and increasing foreign direct investment will make this sector even more critical. In any case, to have a healthy financial portfolio, one needs to maintain a balance by maintaining a healthy mix of different asset classes, said Sudarshan Lodha, Cofounder and CEO, Strata Property Management.

Equipment that can be affected by economic downturn

Mr. Bavin Patel, Co-Founder and CEO, Lenden Club said, “Instruments are market-linked asset classes that are affected by economic downturns. Market-linked asset classes such as stocks, cryptocurrencies, equity-linked mutual funds and certain commodities are inherently volatile during economic downturns. Businesses whose profits are closely tied to the overall economy tend to perform poorly during downturns when the economy is strong. As a result, many stocks frequently decline along with the economy when times are tough. Also, we have seen a general decline in the global crypto market this year. Some well-known cryptocurrencies have fallen at the same rate due to various unfavorable market conditions. Therefore, one should avoid investing in such instruments when the market is unstable.

How should investors prepare for a recession?

Mr. Bavin Patel, Co-Founder and CEO, Lenden Club said, “Make sure you have an emergency fund to meet. Try to have enough money with you, which can save you in such difficult times. Invest in property class that gives better returns, medium or low risk. available, and offers flexibility in terms of tenure from a trusted platform managed by an Indian entity. Also, try to pay off your debt, if any, before going into recession. Being debt-free will bring more relief when a recession hits around you. Finally, have a stable source of income. Continue to work as it helps keep the family’s cash flow constant. It is important.

“Getting your financial house in order is critical to surviving a downturn and even the current level of volatility in the market. Some ways to protect yourself include keeping a diversified financial portfolio in stable alternative asset classes that are not linked to the market, avoiding unnecessary large expenses and keeping a relatively liquid savings. Also, it’s important to consider parking your money in ways that compensate for inflation to avoid negative returns in the long run. During a recession, it’s important to consider your long-term goals and avoid making rash decisions that could cost you money and investments. Also, diversifying is the best way to ensure a healthy and stable investment portfolio in the long run, even though it may seem tempting to invest in high yielding options in the short term,” said Sudarshan Lodha, Founder and CEO, Strata Asset Management.

Which investments or sectors do best and worst in recessions?

Mr. Bavin Patel, Co-Founder and CEO, Lenden Club said, “Investing in quality assets is usually recommended to protect the portfolio during downturns. Investing in greener sectors such as education, healthcare or finance can be seen as more stable than others. The key to reducing factors is diversification, and it can help improve your portfolio.

“While each asset class has its own pros and cons, stable asset classes like real estate, government gold bonds, etc. can be one’s best bet during an economic downturn. Even if the market looks worrisome during a downturn, it is recommended that you don’t get too many trades and keep your money long-term to recoup any losses and build more returns. During an economic downturn, most investors should avoid investing in highly leveraged, cyclical or speculative companies, as these companies run the greatest risk of underperforming during tough economic times,” said Sudarshan Lodha, Cofounder and CEO, Strata Property Management.

“The best recession strategy is to invest in well-managed companies with low debt, good cash flow, and strong balance sheets. As mentioned above, stable asset classes like real estate and gold bonds are asset classes to consider during and after a recession. Investing in blue chip stocks, sector funds and bullish or stable sectors can be considered a wise investment choice in these tough times,” said Sudarshan Lodha.

Disclaimer: The opinions and recommendations presented above are those of individual analysts or distributor companies and not of Mint. We recommend that investors check with certified professionals before making any investment decision.

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