Many or all companies we feature compensate us. Compensation and editorial research influence how products appear on a page. Personal Finance Where to Invest During a Recession: 5 Dos and 4 Don’ts Updated May 28, 2025 10-min read Written by Rebecca Lake, CEPF® Written by Rebecca Lake, CEPF® Expertise: Student loans, mortgages, home-buying, credit, debt, personal loans, education planning, insurance, investing, small business Rebecca Lake is a certified educator in personal finance (CEPF®) and freelance writer specializing in finance. Learn more about Rebecca Lake, CEPF® Hearing talk about a recession is enough to make anyone feel jittery. Recessions can impact you financially in big and small ways, and recovery may take months or even years. When times get tough, a good defense is the best offense. Leaning into investing during a recession may seem counterintuitive if you want to protect your assets, but there are some good reasons to keep one foot in the market. Read on to learn where to invest during a recession and what investments you may want to avoid. Table of Contents What is a recession? Benefits of investing during a recession 5 investments to consider for a recession 4 investments to avoid in a recession FAQs What is a recession? The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” In other words, the economy slows down. Recessions are a natural part of the economic cycle; periods of growth are typically followed by periods of decline. There have been 34 recessions in U.S. history, with the most recent one occurring in 2020. What causes recessions? Each one is different, but common causes include: Unexpected shortages of materials needed to produce consumer goods Housing market crashes Serious disruption in the financial markets Poorly managed monetary policy No one can say exactly when a recession will begin or end. What you can do is learn how to insulate yourself against the worst financial impacts when the economy shrinks. Benefits of investing during a recession When a recession hits, it’s tempting to circle the wagons and pull all your money out of the market. If you’re not invested, you’re not taking any risk, right? While that’s true, you could be missing out on potential growth. Staying invested during a recession offers an opportunity to: Buy low. Stock prices can drop in a recession, allowing you to buy shares at a discount. That can lead to big gains later when prices recover. Buy winners. Some investments shine in a recession and outperform, even when the market is down. Holding these investments can add some stability to your portfolio while prices fluctuate. Dollar-cost average. Dollar-cost averaging means you keep feeding the same amount of money into the market, whether it’s high or low. When prices are down, you can get more of the same stock without changing the dollar amount you invest. A recession is also a good time to rebalance. Rebalancing means buying or selling investments so that your asset allocation matches your goals and risk tolerance. 5 investments to consider for a recession How you invest in a recession should reflect the level of risk you’re comfortable taking. Talking to a financial advisor can help you figure out a strategy that’s right for you. That strategy may include these investments. 1. Defensive stocks Defensive stocks are stocks that tend to do well in any economic environment. They can also be called non-cyclical stocks, since they don’t move with the economic cycle. What makes a stock defensive? It represents a sector of the market that isn’t likely to see any huge drops in spending. So, think consumer staples, healthcare, and utilities. Examples of defensive stocks include: Johnson & Johnson (NYSE: JNJ) Pfizer (NYSE: PFE) Procter & Gamble (NYSE: PG) Walmart (NYSE: WMT) Costco (NASDAQ: COST) Duke Energy (NYSE: DUK) Coca-Cola (NYSE: KO) These types of stocks are usually less volatile in a recession and may provide stable growth over the long term. 2. Dividend stocks Dividend stocks pay out part of their profits to their shareholders. Owning dividend stocks in a recession could generate some steady, stable income if you’ve got the right ones in your portfolio. That means companies that have a history of increasing dividend payouts year over year, even through economic downturns. Market pros know them as dividend aristocrats and dividend kings. Dividend aristocrats have raised dividends for 25+ consecutive years; dividend kings have done so for 50+ years. Examples of both include: Chevron (NYSE: CVX) Walmart (NYSE: WMT) PepsiCo (NASDAQ: PEP) Hormel Foods (NYSE: HRL) Colgate-Palmolive (NYSE: CL) Many of the top dividend stocks are also defensive stocks, helping you insulate your portfolio against a recession even further. 3. Real estate Real estate can be a good investment during a recession since people still need a place to live, no matter what’s happening with the economy. If you don’t have the cash to buy an investment property, you’ve got other options. Real estate investment trusts (REITs). A REIT is a company that owns and operates real estate. REITs pay the profits they make from those properties to their investors. Real estate exchange-traded funds (ETFs). Real estate ETFs hold a collection of investments, which can include real estate stocks and REITs. Real estate stocks. Real estate stocks represent companies that operate in the real estate space. The best real estate investments for a recession are ones that are unlikely to see big shifts in demand. For example, a REIT that owns assisted living facilities or multi-family apartment buildings could be a safe bet. 4. Gold Gold can be a hedge against recessions and help you head off some of the impacts of inflation. Investors like gold because it can hold its value well, even if the U.S. dollar gets shaky. Storing gold bars in your spare bedroom probably isn’t realistic, but you could still get in on precious metals with gold stocks or gold ETFs. Examples of gold stocks and ETFs include: New Gold Inc. (NYSE: NGD) Kinross Gold Corp. (NYSE: KGC) SSR Mining Inc. (NASDAQ: SSRM) SPDR Gold Shares (NYSEARCA: GLD) iShares Gold Trust (NYSEARCA: IAU) You might want to talk to an advisor about how much to invest in gold during a recession. A good rule of thumb is to limit your exposure to alternative investments to 10% or less of your portfolio. If you want to get started with a financial advisor, we recommend Money Pickle. It’s service that pairs you with an advisor for a free 45-minute consultation. 5. High-yield savings accounts It never hurts to have some cash in the bank, especially during a recession. If you lose your job or are temporarily laid off, your emergency fund can help you survive until a steady paycheck starts rolling in again. Savings accounts are virtually zero-risk, since your money is in a bank and not the market. You may not get the same rate of return compared to stocks, real estate, or gold but you don’t have to worry about losing money either. Check savings account rates at your current bank to see how they compare elsewhere. Some of the best savings accounts are found at online banks, which offer a solid combination of high rates and low fees. 4 investments to avoid in a recession What should you not invest in during a recession? In general, you want to avoid anything that’s high-risk or has a reputation for underperforming when the economy declines. And you may want to skip out on anything that just doesn’t feel right for you. Some of the investments may caution against in a recession include: Discretionary/cyclical stocks. Discretionary stocks are things people don’t need to spend money on to live. In a recession, people cut back on things like travel and shopping, so hotel stocks, airline stocks, and retail stocks could all take a hit. Emerging markets. Emerging markets can hold promise, but they’re also more vulnerable in a recession. International stocks and bonds may feel deeper impacts from a downturn than U.S. stocks and bonds. Bonds. Bonds can be hit or miss in a recession, depending on the type of bond and how yields are moving. Government bonds may provide stability, but pay out lower interest rates. Junk bonds, meanwhile, could pay more but require you to take on more risk. Speculative investments. A speculative investment is anything that requires you to make a “best guess” about how it will perform. Options, futures, and cryptocurrency are all high-risk, speculative investments that you may not want to touch while the economic outlook is uncertain. Don’t count out investing during a recession Recessions can bring uncertainty, but the best thing you can do is keep a level head. Ask yourself how comfortable you are with investing during a recession first, then consider which investments make the most sense based on your goals and risk tolerance. Remember, recessions do end eventually. The right plan can help you recession-proof your portfolio and continue building wealth with less stress. Additional resources How to Buy Gold for Beginner: 2025 Guide What Happens to the Price of Gold During a Recession? Is Gold a Hedge Against Inflation? Is the Stock Market Crashing? 2025 Trends and How to Protect Yourself What Is a Market Correction? 2025 Trends and How to Protect Your Assets 13 Top Gold IRA Investment Companies of 2025: Reviewed and Rated Are We in a Recession? 2025 Observations and Predictions What Are Tariffs? 6 Facts You Need to Know in 2025 Will the U.S. Dollar Collapse? Our Analysis for 2025 FAQs Is cash a good investment in a recession? Cash isn’t technically an “investment,” but it can be a smart place to keep money during a recession. Holding cash or cash equivalents (like high-yield savings accounts, money market funds, or short-term Treasury bills) provides: Liquidity: You can easily access funds if you lose a job or face an emergency. Stability: Unlike stocks or real estate, cash doesn’t lose value during a market downturn (though inflation may erode its purchasing power). Flexibility: With cash on hand, you’re in a good position to take advantage of investment opportunities that arise when markets are down. However, over the long term, cash typically underperforms other asset classes, so it’s best viewed as a recession buffer rather than a growth strategy. How long do recessions last? The average recession in the U.S. since World War II has lasted about 10 to 11 months. However, duration can vary widely: Short: The 2020 COVID-19 recession lasted just two months. Long: The Great Recession (2007–2009) lasted 18 months. Recovery time: Even after a recession officially ends, it can take months or years for employment and GDP to fully recover. Recessions are officially declared and dated by the National Bureau of Economic Research (NBER) based on a range of economic indicators. Should I save or pay down debt in a recession? The best strategy often depends on your financial situation, but generally: Prioritize saving if: You don’t have at least 3–6 months of expenses saved. You’re concerned about job security or unstable income. Pay down high-interest debt (like credit cards) once your emergency fund is in place. A balanced approach often works well: continue minimum debt payments while directing extra funds to savings until your cushion is solid, then aggressively tackle debt. What assets hold the most value in a recession? Some assets tend to hold or even gain value during recessions: Cash and cash equivalents: Provide security and liquidity. High-quality bonds: Especially U.S. Treasuries, which are considered safe-haven assets. Gold and precious metals: Traditionally viewed as stores of value. Defensive stocks: Companies in sectors like utilities, healthcare, and consumer staples often remain stable because their products are always in demand. Dividend-paying stocks: Reliable income can offset losses from capital depreciation. Diversifying your portfolio with these asset types can help cushion the impact of a recession.