7 Recession-Proof Industries To Invest Your Money In
Recessions are an unavoidable part of the cycle of business. However, a recession doesn’t mean that your finances have to suffer or that you must avoid investing. Several industries hold their own during a recession and can even financially thrive. The secret to growing your money during an economic downturn is finding those recession-proof industries you can feel confident putting your money into.
For some time now, many economists have predicted that the U.S. economy will enter a recession in 2023. Some even suspect that we’re already in the midst of a recession right now. This economic speculation and uncertainty can create fear, which causes people to stop any financial investment until it feels safe.
It’s unfortunate, and there’s no way around it, but there are ways you can make the best of it so that your investment portfolio doesn’t suffer and you can come out the other end financially on top. This article will go over what makes an industry recession-proof and seven industries to invest your money in during a recession.
What Makes an Industry Recession Proof?
There’s no clear-cut definition for a recession-proof industry. However, the industries listed below have primary things in common—they’re more likely to remain stable during a recession, and their demand isn’t dependent on growing businesses or consumers with plenty of spending money. Instead, these industries play an integral role in daily life and the economy.
For example, this would include industries that provide consumers with staples they always need. The value of these industries comes from the fact that we all need and use them in good and bad economic times. And investing in these industries for their stability may not be the most exciting thing when certain stocks are roaring, or innovative new companies are entering the market. But stable industries are an invaluable place to put your money when the economy is experiencing a significant shift.
It’s also important to note that while these industries listed below may be considered recession-proof or resistant, it doesn’t mean that every company within that industry is recession-proof. Make sure to do your research and due diligence on companies before investing your money.
7 Recession-Proof Industries
So now that you know what makes an industry recession-proof, which should you consider investing your money in? Below are seven industries considered recession-proof for you to potentially invest in right now.
- Grocery and Food
Regardless of the current economic climate, we’ve all got to eat. While many people may change the type of food or food brands they buy or their eating out and food delivery habits, their overall spending on groceries and food won’t change. In fact, some people may even increase their grocery store spending if they’re trying to cut out fast food, expensive meals out, and ordering delivery.
Some high-end grocery stores, like Whole Foods, may naturally see a dip compared to more budget-focused grocery stores. However, grocery and food stores and suppliers are one of the most stable industries during an economic downturn. And in some cases, fast food chains can be considered a stable part of the food industry during a recession. While many people may cut down their eating out budget, that can include expensive meals out and still leave room for cheaper fast food meals. Fast food chains with solid financials and budget-friendly menu options could be a good pick for investing your money.
- Makeup and Cosmetics
While it may seem like the beauty category would be the first thing to cut in many women’s budgets during a recession, many still look to treat themselves during financial stress. They may cut out more expensive beauty spending, such as beauty and spa treatments and costly perfumes. But women often still look for ways to feel better and lower stress with lower-cost beauty purchases like certain makeup brands and products.
In fact, this is so common that there’s even a name for this: the lipstick effect. In times of a recession or economic distress, women will indulge in purchases that provide an emotional uplift without breaking the budget, and lipstick tends to fit the bill commonly.
- Utilities
Utility companies provide essential services, like gas and electricity, which are always needed, even during a recession. People may cut back in those areas but won’t cut off their utility spending. Besides groceries, utilities are about as stable as they come for recession-proof industries. And while it may not be the most exciting place to invest your money, you can keep it safe until the economy picks back up. Many utility company stocks provide solid dividends that could also provide some income.
- Healthcare
Healthcare is another general priority for most, even during a recession. Disease and sickness don’t take a break just because the economy is down. And for the most part, people won’t avoid necessary care and treatment when needed. Because healthcare, including pharmaceuticals, is so essential to many people’s survival, it’s a stable, recession-proof industry to put your money in, just like the other essential daily living industries listed.
Popular stocks in the healthcare industry include brands like Johnson & Johnson and Walgreens. And healthcare doesn’t have to just include medical technology or pharmaceutical companies. It also includes prescription services and over-the-counter health products like Band-Aids and Tylenol.
- Insurance
Insurance can be a good place to put your money during a recession for a few reasons. First of all, like many other industries discussed, the demand for insurance doesn’t just drop suddenly during bad economic times. And in some instances, insurance is a legal requirement, like car insurance. Other types of insurance, like life and health insurance, may also seem even more crucial during economically troubling times. And like utilities, there are regulations in place that prevent upstart companies from coming in and disrupting the sector.
- Wholesale Real Estate
Real estate may be the last industry that comes to mind when you think of stable industries during a recession. However, sometimes it can be a pretty stable industry to invest your money in. For example, wholesale real estate can have a low risk with a high reward nature.
A real estate wholesaler helps connect motivated buyers and interested sellers. A wholesaler will typically reach out to homeowners that may potentially be interested in selling their homes. Often, wholesalers will go for older homes or homes that need renovations. Then when they have willing sellers, they contact a previously made list of already interested buyers, which typically consist of real estate investors.
Wholesale real estate can thrive in bad economic times where distressed homeowners may need a quick, no-questions-asked way of getting cash for their homes, especially for homes that may not sell as fast on the traditional real estate market. Therefore, people who invest in wholesale real estate can be confident that they can make money in all economic conditions with suitable systems in place and hard work.
- Banking and Financial Services
There are a few reasons why banking and financial services are typically considered stable industries to invest in during challenging economic times. First, people always need access to financial services like loans and bank accounts regardless of the current economic situation. Even in recessions, people still need to borrow money or need services for managing their money.
The second reason is that banks tend to be large, well-established institutions with many resources to weather tough times. And the government will step in to help support the banking industry during an economic crisis since a robust banking system is critical for a healthy economy.
The Bottom Line
We can’t avoid recessions, but we can make smart decisions about where we put our money to help it grow instead of decline during an economic downturn. By choosing stable industries to invest your money in, you can weather the storm of a recession without losing anymore and even potentially come out financially better than before. It’s worthwhile to research the financial health and stability of companies within recession-proof industries to ensure you’re investing your money in a stable company, not just a stable industry.
