The best investments in a recession

Joseph Darby

8 of the best investments to make during a downturn

Countries’ economies tend to move in cycles. Like nearly every country worldwide, we’re currently in the midst of another downturn – even if some of the effects in NZ have been delayed by generous taxpayer-funded policies such as the wage subsidy and mortgage holiday and extension. This is nothing new, and there have been plenty of downturns in the past (recessions), each caused by different reasons. Each past recession has been followed by a bounce back in general economic conditions, and investment markets have gone on to new highs. Keen observers will note that by all common measures, global investment markets have already rebounded to new highs after a dramatic fall earlier this year. Investment markets are still unstable (volatile) though, and most people expect them to continue to be. In a volatile market, there are investment opportunities. Understanding what those opportunities are and how to take advantage of them can leave you poised to succeed when the economy returns to normal – as it always does.

Read on if you’re looking to make the most of the opportunity and become one of the winners in a downturn by making one or more of the eight best investments at a time like this:

What to invest in during a volatile market or recession

1. Yourself

When the economy drops or things become volatile, many people find themselves out of work or looking for new opportunities. Set yourself up for success by investing in yourself.

If you don’t want to attend university, certificates can help you break into a new career or increase your income. There are plenty of in-demand jobs which you can train for with online courses, and plenty of professional online training systems to help you learn an array of skills in your own time, such as Udemy, Cisco, and LinkedIn Learning.

2. Cash

Cash is one of the most flexible asset types, and it’s incredibly safe, although sums in NZ banks aren’t guaranteed as they are in most countries. Of course, cash doesn’t offer the returns that nearly all other investments can.

Despite the drawbacks of cash, holding some does offer the opportunity to redeploy money into new opportunities as you find them, and you can always use the cash to cover expenses if you lose your job or experience a financial emergency. Maintaining a healthy cash reserve in the form of an emergency fund is a crucial practice even in good times. Bolstering your cash reserves in a weak market can help you weather the storm.

Best investments for a recession - yourself

3. A business

When the market is doing poorly, it might seem crazy to start a business. If established companies are struggling to survive, how can a new one succeed? But if you lose your job or have extra time outside on your hands – perhaps due to lockdown restrictions – have a think about what opportunities that might be around you:

  • Are people looking to trim their budgets by cutting out luxuries? Try offering less expensive but still high-quality goods such as homemade foods.
  • If you know your way around computers, provide your services to help people keep their older PCs running for another year or two.
  • Do you have knowledge or skills which might help others? It doesn’t have to be flashy, and could be as simple as dog-walking or an online service.

Plenty of side businesses don’t require significant cash investments and can turn into a full-time career. Even if you don’t take your business full-time, it can turn into a second source of income and make it easier for you to ride out any further economic uncertainty.

4. Real estate (property)

Property has long been a Kiwi favourite.

When the economy falters, real estate prices also tend to drop, though NZ property prices have remained strong in most regions for the time being. Once some of the taxpayer funded support inevitably ends, most commentators still think that the usual impacts of a recession will hit house prices too:

  • Renters (tenants) have trouble paying their bills,
  • Landlords struggle to find new tenants, meaning that rents usually decrease, this makes property investment less attractive over the short term,
  • Unemployment rates are usually higher for younger people, as opposed to workers with more skills and experience. As younger people are first home buyers, this means fewer buyers,
  • Some people will struggle to keep repaying mortgages, which means they will try and sell,
  • Fewer buyers and more homes for sale causes house values to fall.

Combine a weak real estate market with the fact that the Reserve Bank of New Zealand usually cuts interest rates to try to boost the economy, and real estate investment becomes an attractive opportunity for people who are in a position to buy. This could be people with cash reserves, and/or stable employment prospects.

Even if you just buy a home you intend to live in for the long term, buying in a weak market means you can secure a low monthly mortgage repayment. That gives you more flexibility in your budget and more cash you might want to deploy to other investments.

5. Precious metals

Some investors like to use precious metals, like gold and silver, as possible protection against economic shocks and inflation. The idea is that these metals retain some form of value even as governments affect the value of their currencies by printing more money in response to a crisis.

6. Bonds

Few people invest directly in bonds anymore, though most people invest in them to a certain degree without even considering it through most KiwiSaver Scheme fund choices.

Bonds have traditionally served as a safe harbour during the economic storms which occasionally blow up.


An uncertain share market offers excellent buying opportunities for people who like investing. This is often compared to a clearing out sale at your favourite store – as the downturn might enable you to buy shares at a significantly lower price than usual!

Picking individual shares to invest in can be difficult at the best of times, so most people who buy shares directly focus on well-established companies or blue-chip stocks.

If you have the funds and stability in your income, buying shares in companies, even if you see some short-term losses, can help you build long-term wealth.

8. Funds

These sorts of funds are invested like most KiwiSaver Schemes, with one key advantage – you can get your money back at any time. During turbulent times, diversification is essential to reducing risk. Funds make it easy to diversify compared to only buying shares in a single security.

Unlocked managed funds can hold shares in hundreds of different companies spread across the entire market or can focus on specific sectors of the economy. They can also hold other assets like bonds, property, and some cash.

You can select a fund based on your desired asset allocation or risk tolerance. This means you might invest in a fund that holds only bonds if you want to play it safe, or you can put money in an aggressive fund that holds nearly all shares if you don’t mind the bumps as the economy recovers.

The bottom line: recession investments

An economic downturn can make investing scary, but there’s no better time to strive to improve your financial situation. This is two-fold:

  1. Invest in yourself or in a business to enhance your economic prospects as the market improves, and
  2. If you have the resources, buying property, shares, or investing in funds can help you build a successful portfolio than can gain value as the economy recovers.

As Warren Buffet famously said:

“Be fearful when others are greedy and greedy when others are fearful.”

If you’d like to discuss how to take this opportunity with one of our wealth management specialists, get in touch to book a complimentary initial consultation. It would be our pleasure to assist.