The S&P 500 has lost an average of 21 percent during past recessions. If that makes you nervous, it should. Good thing I have a solution for you on investing in an economic recession.
And it’s not investing in the classic recession-fighting sectors. The classics – utilities, health care companies, and consumer staples – earned their reputations by doing better than the markets during a recession.
So, what’s better than losing 21 percent? How about losing 15 percent (the typical performance of utilities in a recession)? Or losing 7.3 percent (like health care companies)? Or losing "only" 2.4 percent (like consumer staples, the classic of classics)?
The one thing all these traditional recession-beating investments have in common is that they lose money during an economic recession.
On the other hand, alcoholic beverage companies will make you 6 percent – going by their past record during recessions. And household product manufacturers will make you 1.8 percent. But the companies with the best track records during recessions belong to the tobacco sector. They’ve gone up an average of 9.6 percent.
So drop the classics. And invest in the three sectors that not only beat the market but can also make you money when times are tough.
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