What securities are safe if the market collapses?
Q – Please suggest some ETFs or conservative stocks that will help to resist to an eventual recession. Is it a good idea to put more of our savings into utilities, telecoms, and infrastructure and real assets? What about REITs? I am retired and just wish to preserve my capital and have some modest capital gains for the next five or 10 years. – Co P.
A – For starters, let me be very clear. In a recession, all stocks and equity-based funds are vulnerable, even the bluest of the blue chips. It’s a matter of degree.
For example, stocks with an unusually high p/e ratio (some of the tech stocks of companies like Amazon) are more likely to get hit than those with a low p/e. Regulated utilities like Fortis Inc. would normally suffer less because much of their revenue is guaranteed, and the dividend acts as a floor under the share price. Apartment
REITs would tend to be less exposed to a shrinking economy than office or mall REITs because people always need a place to live. Consumer staples stocks, which have been out of favour recently, also tend to hold up better when the economy tanks.
Bonds are always a safe haven in a recession. For example, in
2008 a portfolio that was dividend 60 per cent stocks, 40 per cent
bonds would have lost 15.2 per cent, according to an interactive
chart on the Steadyhand website. But one that was only 20 per
cent in stocks and 80 per cent bonds would have lost only 0.9 per
So, my advice if you are fearful of a recession is to increase your
bond holdings and weight your stocks towards utilities, telecoms,
apartment REITs, and consumer staples companies like Costco
Wholesale Corp. – G.P.
Do you have a money question you’d like to ask Gordon? Send it along and then check out our Q&A section regularly to see if it was chosen for a response. Send questions to [email protected] and write Zoomer
Question on the subject line. Sorry, we cannot send personal answers.