7 Best Investments to Buy in a Recession: Insights from Financial Advisors
As economic uncertainty looms during recessions, many investors grapple with how to protect their portfolios and even find opportunities for growth. Expert financial advisors emphasize that rather than panic-selling, a balanced and thoughtfully diversified investment mix is key to weathering downturns and positioning for eventual recovery.
Kate Stalter, CFP, outlines seven investment options well-suited to recessionary environments in her recent article on U.S. News. Below is a detailed look at these opportunities and the rationale behind them.
Avoid Panic Selling: Markets Often Price in Recessions Early
Recessions naturally generate market jitters, prompting some investors to sell off equities quickly. However, history and research suggest this approach often backfires. Dimensional Fund Advisors highlighted that equity markets usually decline before recessions officially begin, as investors anticipate economic troubles. Moreover, stock markets have tended to perform positively on average during the recovery periods following recessions.
This suggests that reactionary trading based on short-term economic news can lock in losses and hurt long-term wealth accumulation.
The Importance of a Balanced, Income-Generating Portfolio
Dan Pascone, founder and CEO of Tailored Wealth, advises investors that no single “perfect” investment shields portfolios completely during recessions. Instead, he recommends a diversified mix—combining dividend-paying stocks, U.S. Treasurys, quality corporate bonds, defensive sectors, Treasury inflation-protected securities (TIPS), and cash reserves.
This blend not only cushions volatility but also provides reliable income streams and inflation protection, helping investors stay invested and sleep better at night while awaiting market improvement.
1. Gold
Gold often serves as a safe haven asset amid market downturns and economic uncertainty. For example, in 2025, SPDR Gold Shares ETF (GLD) returned approximately 61%, significantly outpacing the SPDR S&P 500 ETF (SPY), which delivered an 18% return.
Factors such as geopolitical tensions, inflation concerns, a weakening U.S. dollar, and substantial central bank gold purchases have driven gold’s performance recently. However, as Prudence Zhu, founder of Enso Financial, notes, gold should be a modest part of the portfolio—useful as a hedge during crises but not the primary holding.
2. Dividend Stocks
Dividend-paying stocks, especially in stable sectors like utilities, healthcare, and consumer staples, tend to withstand recessions better than the broader market. Such companies often have solid balance sheets and steady cash flows, providing income even when markets decline.
Pascone cautions against focusing solely on the highest yields and instead emphasizes companies with reliable dividend histories for smoothing portfolio volatility.
3. U.S. Treasury Bonds
Long-dated U.S. Treasury bonds, particularly the 30-year bond, offer a hedge against inflation and economic shifts. Though they carry more interest rate risk compared to shorter-term notes, Treasury yields typically fall during recessions, which boosts bond prices.
Dominic Ceci, CIO at Johnson Financial Group, explains that yields decline as economic growth slows and the Federal Reserve often cuts interest rates to support the economy. The 30-year Treasury recently rallied, reflecting these dynamics.
4. Defensive Sector ETFs
Consumer staples, healthcare, and utilities are considered defensive sectors because consumer demand for their products remains relatively constant even during recessions. ETFs tracking 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 investors diversified exposure to resilient industries.
These ETFs are a practical option for investors who prefer not to pick individual stocks but still want to lower overall portfolio risk.
5. High-Quality Corporate Bonds
Bonds issued by financially strong governments or corporations with high credit ratings typically exhibit lower default risk and reduced volatility compared to lower-quality bonds. High-quality corporate bonds can provide steadier income and serve as a buffer during market turbulence.
Bond sensitivity to interest rates, measured by duration, remains a key consideration in bond selection, with shorter durations generally less sensitive to rate changes.
6. Cash or Cash Equivalents
Maintaining a reasonable cash cushion—through money market funds or certificates of deposit—offers stability and liquidity in uncertain times. While returns may be lower than other asset classes, cash equivalents preserve capital and provide funds to capitalize on investment opportunities as market conditions improve.
7. Treasury Inflation-Protected Securities (TIPS)
TIPS help protect investors from inflation risk by adjusting principal based on the Consumer Price Index (CPI). Including TIPS in a recession portfolio can help ensure that purchasing power is maintained even if inflation rises unexpectedly.
Final Thoughts: Staying the Course
Financial advisors consistently stress the dangers of trying to time the market or reacting hastily to economic news. A well-constructed portfolio—balanced among stocks, bonds, defensive investments, and cash—better equips investors to manage downturns and benefit from recoveries.
Rebalancing periodically to maintain target allocations also helps manage risk without resorting to emotional decision-making. Investors aiming for income and growth during recessions should focus on quality assets that provide resilience and steady returns, rather than chasing quick fixes.
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