7 recession-proof industries to protect your money

Recessions are part of the business cycle. However, that doesn’t mean they have to be painful or destructive to our finances. Many industries hold their own and thrive even during economic downturns. The secret is discovery these recession-proof industries.


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It’s unfortunate, but there is simply no way around recessions. We all have to go through them. Read on as we look at some of the best choices for protecting and growing your money during recessions, from everyday purchases to real estate.

How to invest with a recession on the horizon

When you think about it, a recession is always approaching, even in the strongest economies.

However, at times like these, even average investors can recognize that recession is coming sooner rather than later. Exactly how you should invest as a recession approaches will depend on your age, risk tolerance, capital and other factors.

However, almost all investors can benefit from moving away from the riskiest and most successful sectors in booming economies. Their money can wait out tough times in troubled sectors of the economy that may not grow as quickly in good times but retain more of their value in bad times.

It is essential to understand this as an essential part of planning for your financial future.

What makes an industry recession proof?

There is no simple definition for a recession proof industry. But these economic sectors tend to share one main thing in common: their demand is not driven by the growth of businesses or consumers who have a lot of money to spend. Instead, they make their mark through their vital roles in American life and our economy.

Simply, their value comes from the fact that we all need to use them in good times and bad.

This stability may not be the most exciting thing when stocks are roaring and new innovative companies are hitting the market every week. But it’s invaluable when massive swings rock many portfolios.

On the other hand, some industries are more than recession proof. They’re practically in a recession-friendly! When people experience financial difficulties, their buying behavior and habits often change. They may opt for cheaper brands at the supermarket or shop in stores with an emphasis on low prices rather than quality.

They may also seek stress relief from entertainment or chemical sources. All of these types of industries can experience notable growth during a recession.

The best recession-proof industries to invest in

So, now that you know what makes a good recession-proof industry, you might be wondering which sectors of the economy fit the bill. Below are the top choices to help you preserve and grow your capital during tough times so you’ll be ready when it’s time to retire.

Grocery and Food

We all need to eat, whether the economy is booming or in decline.

While many people can change the exact type of food they buy, their overall spending at the supermarket or grocery store won’t change too much in most cases. However, some people may even increase their grocery spending by cutting back on expensive meals and fast food.

Naturally, high-end supermarkets like Whole Foods may see a bigger drop than budget-focused ones like Aldi. Still, grocery and food stores and suppliers as a whole are one of the most stable sectors of the economy as we return to good economic conditions.

Makeup and Cosmetics

This one is so well known that there’s even a term for it – the lipstick effect.

This pop economic concept refers to an increase in purchases of lipstick, makeup and other cosmetic products in times of economic and financial crisis. The reasoning is that women worried about their finances but still looking to afford a low-cost purchase will often opt for makeup as a way to feel a little better about being held hostage to finances. Some say buying makeup is all about “scratching the urge to buy.”

A person at their best can often be a healthy way to feel good during otherwise worrying times.

But, contrary to what you might expect, the research did not find that women opted for discounted or private label versions of products, instead sticking to popular brands.

Alcohol, tobacco and drugs

Obviously, this represents the dark side of recession-proof investing.

There’s no getting around the fact that recessions lead to job losses, foreclosed homes, difficulty paying bills, and other economic strains. These can be difficult to deal with for many people who are already struggling. Many turn to chemical aids to relax and cope.

Recessions often see relatively small increases or decreases in demand for alcohol, tobacco, and legal drugs. Anyone who’s had a beer after a hard day knows why. It can be good to get away from the problems for a bit.

Regardless of your personal feelings about these industries, it’s clear that they maintain a strong economic position. This is true whether we are in a recession or a boom. Unlike many past recessions, legal marijuana is also available as an investment industry. Many states have legalized it for recreational or medical use since the last Great Recession in the late 2000s.

Utilities

Your utilities may not be the sexiest or most exciting sector to invest in, but utilities are a great choice for weathering recessions.

However, they are about as stable as things get, because we generally don’t adjust our electricity, water, or other utility usage too much, regardless of how the economy is changing. This means fewer surprises, which may be exactly what many investors are looking for.

Most offer solid dividends that can also generate income. Utilities can also take advantage of tougher economic times because, as interest rates generally fall, they can borrow cheaply to expand or maintain their systems. They also tend to be highly regulated, preventing the most significant new competition.

Health care

Healthcare is one of the most often cited recession-proof industries.

It is believed that people will always get sick and rarely avoid necessary treatment. Ultimately, health is one of the most important things, if not the most important thing for many people.

Part of the reason health care is so recession-proof has to do with how most Americans pay for it, with insurance picking up most of the bill. Therefore, they are insulated from the true overall cost, whether the economy is booming or busting.

Wholesale real estate

Wholesale real estate may not seem like a recession proof industry. But in reality, it may be one of the best! This is due to its low risk and high reward nature.

A real estate wholesaler helps connect motivated buyers with interested sellers.

First, wholesalers cater to homeowners who often don’t even have their homes on the market, looking to buy typically older homes or renovate. Then, once they have found a willing seller, they contact a previously compiled list of buyers interested in that type of property, usually real estate investors.

To connect these two sides of the transaction, wholesalers usually take a small spread. It can range from a few thousand dollars to tens of thousands. In many states, they are never required to take possession of the home themselves.

Wholesale real estate can thrive in good times (when people still need to sell older, run-down homes) and in bad times, when distressed homeowners may need a quick, no-questions-asked way to get money in exchange for a house that might not sell quickly in the traditional market. Therefore, wholesalers and those who invest in them can be sure that they can make money in all economic conditions with hard work and good systems.

Insurance

Insurance can be a good investment in a recession in two ways.

First of all, just like many other industries mentioned above, the demand for insurance does not drop as sharply during tough economic times. Some insurance is legally required, such as car insurance.

Products like life insurance may seem more important than ever with the unstable economy. Much like utilities, regulations also prevent start-ups from moving in quickly to disrupt the industry.

On the other hand, you can also invest in insurance products tailored directly to you and your investments. Experienced companies like Hamilton Insurance Agency can work with you to assess your financial situation and manage your risks. Not only will you improve your wallet, but you will also sleep better at night.

Recession-Proof Industries: The Best Places for Your Money in These Tough Economic Times

We cannot avoid recessions. But with a little planning and some knowledge, you can weather the storm and potentially even emerge stronger than ever.

All thanks to the magic of recession-proof and recession-proof industries. These can range from basic consumer goods like food and cosmetics to more original options like real estate or wholesale insurance. Either way, there are plenty of options for portfolios and risk tolerances of all varieties.

It’s worth spending time developing your plan for the next recession. That way you’ll be prepared no matter what the economy throws at you.

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