It is not recommended to invest in real estate during a recession because potential buyers may not have the funds available to make property purchases.
The probability of an economic recession is progressively increasing due to bank failures, surging inflation, rising interest rates and stock market volatility. While India’s market is presently experiencing an upward trajectory, foreign markets are defined by fluctuations. If contemplating investments during this period, it is important to carefully consider certain key factors.
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What are your goals before investing in a recession? Do you intend to minimise risks in volatile situations or capitalise on lower prices by expanding the number of stocks in your portfolio? It’s important to recognise that a recession involves more than just a market downturn; it also entails an economic slowdown that may result in job loss and other financial difficulties. We’ve enlisted below some investment options to consider during a recession and options that are likely best to avoid.
Invest in Mutual Funds
Investing in a mutual fund during a recession can be a favourable strategy. Compared to holding a small portfolio of individual stocks, a mutual fund typically exhibits lower volatility. Investors are exposed to less risk by diversifying their investments across multiple stocks rather than relying heavily on the performance of a single stock and the overall economic conditions.
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Invest in Gold
Gold has always been a reliable and enduring option for investment. In recent years, it has gained popularity as an investment option during times of market volatility. Financial advisors recommend allocating a portion of 10 to 15 percent of one’s investment portfolio to gold or silver when faced with economic downturns and inflationary conditions.
Investing Money in Bonds
In times of financial decline, it is advisable to consider investing in fixed-income instruments such as bonds. These investments offer a consistent income stream with minimal risk. Additionally, allocating funds to Dividend Exchange-Traded Funds (ETFs) can help mitigate losses caused by market conditions.
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Don’t Invest in Properties
It is not recommended to invest in real estate during a recession because potential buyers may not have the funds available to make property purchases. This can result in property prices remaining low. The government has taken measures to combat illegal funds, particularly in the real estate market where undisclosed funds were previously prevalent. As a result, the real estate market is anticipated to experience a continued slowdown.
Avoid Keeping Cash
In times of economic recessions, it is advisable to refrain from keeping cash for two primary reasons. Firstly, hoarding cash can be risky. Secondly, the currency tends to devalue over time due to rising inflation in the economy.
