What’s the best way to invest during a recession?
Stephen Grootes learns more about recession-proofing your investment portfolio in this edition of Investment School. Brought to you by CFI, an Authorized Financial Service Provider.
Investors around the world are highly concerned about their portfolios following the rising fear of a recession in the US. According to Bruce Kasman, Chief Economist at J.P. Morgan, there’s a 40% chance of a recession should the US administration continue to undermine investor trust with the ongoing tariffs and trade policies.
Now is an ideal time for investors to prepare themselves and strategize how to navigate this looming recession. But where does one start?
To dive deeper into the various ways to invest during a recession, The Money Show’s Stephen Grootes sits down with Vincent Anthonyrajah, CEO and co-founder of Differential Capital. Anthonyrajah touches on how to invest defensively, which stock groups to avoid and notes important takeaways from previous recessions.
Listen to the full conversation below:
Anthonyrajah opens with the importance of revisiting historical observations around recessions and explains the use of Beta, a measurement system which quantifies a stock’s volatility and overall risk. He highlights that there are groups of stocks which tend to crash faster when the market crashes, but struggles to rise back up when the market normalizes.
“If you are worried about a recession, then you probably want to avoid those groupings,” he says.
He mentions banks and insurers as an example of being particularly volatile during past recessions.
“What happens is the market tends to get worried about the banks and as we’ve seen throughout time - banks also tend to go bankrupt during recessions. In the past, insurers also used to be bad (during recessions) because they had guarantees that they used to give their policyholders.”
As for good stocks to pay attention to when the market goes down, Anthonyrajah highlights gold as being a trustworthy and steady investment along with the South African Brewery.
In short, Anthonyrajah’s important tips for investing during a recession include investing in staples, avoiding historically volatile stocks, timing the market crash, and, as with most investment strategies – diversification is key.
“You should always have a spread across industries and geographically. Diversification is always your friend.” - Vincent Anthonyrajah, Differential Capital, CEO & Co-Founder.
ALSO READ: How SA Investors Can Navigate Uncertainty Around Trump’s Trade Policies
For more insight and updates on the everchanging world of investing, make sure you tune in to Investment School, brought to you by CFI, every Thursday on The Money Show with Stephen Grootes (6pm-8pm).
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