How to invest in a recession

Archived article

Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.

There appears to be plenty to worry about right now. 

Inflation is at levels not seen for four decades. Sterling is in the doldrums, trading at its weakest level against the dollar since 1985. Add to this, the ongoing supply chain disruptions, war in Ukraine and the spectre of further interest rate rises. It all adds up to a fairly gloomy picture.

However, in my opinion, despite all the negative headlines, investors shouldn’t despair – tough times can present great opportunities for the well prepared.

Important: This article outlines Charlie’s personal investment views. It is not a personal recommendation to buy, sell or hold any of the investments mentioned. Experienced investors should form their own considered view or seek advice if unsure. Charlie personally holds shares in Diageo and Next. This article is original Wealth Club content.

Why preparation is key

In the 10-minute video below, I discuss my approach to investing in tougher times.

I should first stress, to avoid disappointing you, that you won’t find any economic predictions in this video. In my view, being prepared for a recession in no way equates to being able to forecast or time one. Virtually nobody saw the 2008/09 financial crisis coming, nor a global pandemic. And no one really knows how this current economic situation will play out.

That said, if history teaches us one thing, it’s that recessions and crises will occur from time to time. To my mind, investors need to be prepared. 

How investors could be ready for a recession 

I prepare by seeking out resilient businesses – those that can withstand economic headwinds and emerge stronger. In the video, I discuss what I believe makes a business resilient, using pest-control provider Rentokil and alcoholic beverages multinational Diageo as examples.

Resilience doesn’t mean a business is immune to economic ups and downs. In fact, some businesses I like are quite sensitive to the economy. For these companies, extra caution is required. There’s one critical factor I look for above all else, and I discuss this in the video, using UK retailer Next plc as an example. 

I also shed light on why I think management and culture are crucial in seeing businesses through tough times, and why I believe a recession isn’t something to be feared, but arguably embraced.

Watch video: how to invest in a recession


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