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Investing for a Rainy Day: How To Make Recession-Proof Investments to Secure Your Money

Jawad Khan

Have you been following news channels and talk shows lately?

There’s been a lot of talk in the media of late about the prospect of another recession looming large. Most of us haven’t forgotten the last recession, which is unsurprising given that it was less than a decade ago.

The recovery since then has been slow and painful, but in the last few years, it has seemed as if the global economy would be moving toward a bigger and brighter future.

However, somewhere along the line that growth has stalled. And that is why it has never been more important to make secure investments.

There are several reasons why expert economists are fearing another global financial crisis.

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1. Major Economies Around the World are in Trouble

There are numerous problem areas in the world right now. China’s growth bubble has burst and the Chinese government has been forced to take steps to control the dramatic corrections seen in the Chinese stock markets.

Chinese stock market graph

Any change to the Chinese economy has a huge impact not only on the U.S. economy but also on dozens of other countries around the globe.

The EU is a continuing cause for concern, with several countries still bound by austerity measures implemented by the European Union in a bid to control their spiraling debt.

Oil prices have crashed and the Middle East has descended into a seething maelstrom of violence, forcing hundreds of thousands of people to flee their homes, which in turn puts even greater pressure on the Eurozone.

2. Economists Are Wary of Poor Policymaking

Right now, experts are torn. Some are convinced that a recession is just around the corner. Others believe the problems we are currently experiencing are just temporary.

Without the benefit of a crystal ball, it’s impossible to see into the future, but there is definitely a risk that following a long cycle of economic growth, the global economy is in serious danger of crashing.

A recent Pew Research Center survey shows that more than 63 percent of Americans believe the U.S. economy is still no safer than the 2008 recession.

Doubts of security about US economic system pie chart

History tells us that policymakers have a habit of making poor decisions. Time and time again, they don’t learn from the mistakes made by their predecessors.

Years of unconventional monetary policy have failed to address the problems that caused the previous financial crash. Quantitative easing and interest rate reduction hasn’t helped, so what’s next?

The concern is amongst economists that a few more minor hiccups could be all it takes to plunge the global economy into a full-blown crisis.

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3. Investors No Longer Trust Traditional Investment Modes

All the turmoil and political upheaval have affected global economies. Stock markets have become increasingly fractious in recent months, with some sharp corrections and millions wiped off share values overnight.

As a result, investors have started to look at alternatives to traditional investment funds.

People with lots of money in the bank rarely keep it in a savings account. With interest rates so low, there is very little point.

One option is to invest in bonds, or you could speculate on the currency markets to make your money work harder, but these are both risky strategies.

Stocks, shares, funds and other asset linked investment vehicles are directly affected by what’s happening in the financial markets. If there is a huge stock market crash, you could see the value of your investments drop like a stone.

Why You Should Seriously Consider Gold Investments

The price of gold has surged in the last few weeks. Online gold investment platforms like Global Intergold have seen record numbers of customers buying and selling gold.

Institutional investors, corporate buyers, and even governments are buying up gold, which is pushing prices up.

To illustrate this, £239 million was poured into Gold Bullion Securities, a gold tracking fund provided by ETF Securities.

This is the largest amount of cash received in one day since January 2009, says the company. The firm claims to have attracted more than £500 million in new investment since the start of the year.

Gold prices are notoriously unpredictable, but since December 2015, prices have tracked steadily upwards, reaching a high of $1,234 per ounce on February 11th.

A steady rise in prices of gold graph

Despite this, the continuing volatility in the world’s financial markets combined with the uncertainty in the U.S. as the election process moves inexorably forward is pushing investors to move their money into gold.

The reason for this is simple. Gold investment is traditionally seen as a safe haven during times of uncertainty.

Gold acts as an “echo chamber” reflecting investors’ fears about stalled economic growth. Gold is not affected by stock market fluctuations and the price is more likely to go up than down during a recession, as investors move their money out of stock and shares.

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Ways You Can Make Gold Investments

It’s easy to invest in gold, even for novices, and there are several ways to do it:

  • Exchange traded funds, also known as ETFs, are sold through brokers. These track the price of gold and are a good choice if you want to invest in gold without actually owning physical gold.
  • Unit trust investments in gold mining companies are another option for investors. These are run by experienced fund managers, Investec Global Gold and BlackRock Gold & General are two of the best known (and most highly respected).
  • A third option is to buy physical gold in the form of coins, bullion and bars. Anyone can open an online trading platform account and buy gold. Small amounts can be bought and sold online or offline, either from brokers or direct the Federal Reserve or Royal Mint. Your acquisition is stored in a secure vault and when the time right, you can sell.
  • Lastly, investors with a stronger stomach for risk can invest directly in shares issued by gold mining companies. However, this route into gold is not advisable unless you know exactly what you are doing.

The only downside of investing in gold is that unlike other investment funds, gold doesn’t generate any income, so you only make money if you sell at a higher price.

Wrapping Up

For investors who like to know their money is safe, it is definitely worth diversifying, at least, some of your wealth into gold.

In the short-term, you may see good gains on your investment, but in the long-term, this is not necessarily the case, with popular investment funds showing losses over the last five years.

Despite this, gold is considered to be the best insurance against inflation, and if global stock markets implode, at least, your money will not be affected.

Image Credit: Utah778 / Getty Images
Jawad Khan Member
Jawad Khan is a content marketing consultant and a freelance blogger for hire. Follow him on his blog Writing My Destiny.