7 Best Investments to Buy in a Recession: Expert Financial Advisor Insights
As economic uncertainties loom, many investors wonder how to best protect and grow their wealth during a recession. While the instinct to make quick portfolio changes in response to market turmoil is common, financial advisors emphasize that panicked moves can often harm long-term financial goals. Instead, a balanced and thoughtful approach to investing during downturns can help weather the storm and position investors for recovery.
Here, based on expert advice compiled by Kate Stalter and Brady Porche for U.S. News’ financial section, are seven investments considered prudent during recessionary times.
1. Gold: A Crisis Hedge
Gold is a traditional safe haven asset favored for its reliability during periods of market volatility and inflation. In 2025, gold-backed exchange-traded funds (ETFs) like SPDR Gold Shares (GLD) significantly outpaced the broader stock market, benefitting from geopolitical tensions, a softer U.S. dollar, and persistent inflation concerns.
Prudence Zhu, founder of Enso Financial, describes gold as "the drama friend of your recession portfolio"—it adds crucial protection in crises but should be a modest portion of an overall diversified portfolio. A small allocation to a low-cost gold ETF can effectively hedge against market downturns and inflation spikes without sacrificing growth potential.
2. Dividend Stocks: Income and Stability
Dividend-paying stocks, especially in stable sectors such as utilities, healthcare, and consumer staples, tend to hold up better than the overall market during recessions. These companies generally have solid balance sheets and generate reliable cash flow, which supports steady dividend payments even in tough times.
Dan Pascone, CEO of Tailored Wealth, advises viewing quality dividend stocks as a core component of the equity allocation for income-focused investors. While they carry stock market risks, dividend stocks can provide consistent cash flow and help smooth portfolio volatility.
3. U.S. Treasury Bonds: Safe Haven and Income
U.S. Treasury bonds, particularly the 30-year bond, serve as a long-term hedge against inflation and economic shifts. Though they carry greater interest rate risk than shorter treasury notes, these bonds typically increase in value during recessions as yields fall with economic slowdown and Federal Reserve rate cuts.
Dominic Ceci, chief investment officer at Johnson Financial Group, notes that Treasury yields tend to decline during recessionary periods without rising inflation, supporting positive bond returns. Recent rallies in long-term Treasuries underscore their role in capital preservation.
4. Defensive Sector ETFs: Essential Consumer Goods and Services
Certain sectors are considered "defensive" because their products and services remain in steady demand even in economic downturns. These include consumer staples, health care, and utilities. Exchange-traded funds focusing on these sectors—such as Utilities Select Sector SPDR Fund (XLU), Health Care Select Sector SPDR Fund (XLV), and Consumer Staples Select Sector SPDR Fund (XLP)—offer diversified exposure.
Pascone recommends these low-cost defensive ETFs for investors who prefer not to pick individual stocks, as they can reduce portfolio risk. However, he cautions that these sectors can sometimes become crowded and expensive, so they should complement rather than replace other holdings.
5. High-Quality Corporate Bonds: Creditworthy Income
Investing in bonds issued by highly rated corporations provides steady income with lower default risk. High credit ratings from agencies signal financial strength, making these bonds more resilient in recessions.
Investors should assess bond volatility in terms of credit quality and duration—the latter measures sensitivity to interest rate changes. While some bonds are more volatile, high-quality corporate bonds are favored during downturns for offering relatively stable returns.
6. Cash and Cash Equivalents: Stability and Liquidity
Maintaining a cash cushion or investing in cash equivalents like money market funds or certificates of deposit (CDs) provides safety and liquidity. While these options yield lower returns, they shield capital from market volatility and offer funds ready for opportunities during market recoveries.
7. Treasury Inflation-Protected Securities (TIPS): Inflation Protection
TIPS are government bonds specifically designed to help investors guard against inflation, with principal adjusted based on changes in the Consumer Price Index. This feature makes TIPS a valuable holding during economic periods marked by rising prices, preserving purchasing power.
Expert Advice: Focus on Balanced Portfolios and Discipline
Financial professionals stress that there is no single "perfect" investment to buy during a recession. Instead, constructing a well-diversified portfolio featuring a blend of dividend-paying stocks, government securities, bonds, defensive assets, inflation protection, and an appropriate cash reserve is crucial.
Regular portfolio rebalancing can prevent excessive risk exposure and help avoid the pitfalls of sequence-of-returns risk, especially important for retirees relying on income withdrawals.
As Dan Pascone succinctly puts it, "In a recession, it’s not about finding the one perfect investment. It’s about building a mix that lets you sleep at night, stay invested, and be ready when things turn around."
Final Thoughts
Recessions naturally raise fears about market performance, but history teaches that markets often recover and can provide gains after downturns. Panicked selling often sacrifices these benefits. Embracing a strategic, diversified approach guided by financial expertise can offer stability and growth potential, helping investors navigate economic challenges confidently.
For investors interested in further insights and manageable investment strategies during volatile periods, consulting with a certified financial planner or advisor remains a prudent step.
For more investing tips and resources, visit U.S. News & World Report’s Money section.