You've probably heard horror stories about people who had millions invested, only to lose it all during an economic crash. Sometimes the problem is lack of diversification and sometimes it's just bad luck. Predicting the future to best protect your assets can be challenging. But there are a few tried and true methods you can use that will help, although they won't give you as high of a return as riskier methods.
You can get insurance in case your health goes down the tubes and you can get car insurance in case you get in a wreck, but few know that you can also buy insurance that will help you if you suddenly lose your job. One type is supplemental unemployment insurance, which will cover a portion of your salary if you lose your job. Not everyone can qualify for state unemployment insurance, so this can be an additional package for a worst-case scenario. Home owners also purchase mortgage insurance so they know their mortgage will be paid for in case the economy goes downhill and they're cut from their jobs.
Safer Market Bets
If you have a portion of your money invested in a stock portfolio, consider moving to safer market choices. When the economy takes a downturn, stocks can tumble leaving people with huge money losses. Consider investing in treasury notes instead, which have a lower return but are a reliable investment. You might also choose stocks in industries more likely to be recession-proof. This doesn't mean they won't fall at all, but they'll fall less than their counterparts.
Instead of investing in stocks, consider investing in tangible assets that are more reliable and won't be as likely to bottom out. Gold is a good example of a tangible asset you can invest in. Gold fluctuates, but less than unstable stock portfolios during tough economic times. Silver and platinum are other good options for investing.
During an economic downturn, real estate sells for a much lower price. If you can invest in it without putting yourself in great financial risk in the process, this can be an opportunity to buy low on an asset that historically sees its value rise. Buying an older home at a low price and renovating it is one way to make money on property. Property rentals designed for college students have good returns. Even renting a room in a large house or renting a house as a vacation home can be profitable options.
- Life Broker: Mortgage Protection Insurance
- U.S. News & World Report: Should You Buy Supplemental Unemployment Insurance?
- U.S. News & World Report: Is Your Portfolio Ready for a Double-Dip Recession?
- Commodity HQ: Doomsday Special: 7 Hard Asset Investments You Can Hold in Your Hand
- The Telegraph: 10 Ways to Cash in During the Recession
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