Recession proof investments

[digger_R]

A significant amount of my savings are in cash at the moment (we're talking around 200k) - I'd like to find some investments where I can drop it in and leave it for 3-5 years minimum that are recession proof and still offering a decent level of return.

Could the resident financial bods please offer some decent advice - obviously this is very general but broad groupings of investment types (even specific recommendations would be great).
Anything that can use the power of compounding over a long period would be especially welcome - even more so if I don't have to actively manage it.

I'm still UK tax resident, not employed for UK purposes and have a small house as an investment. I earn less than 10k per year in the UK.

[Mr Pointy]

There's no such thing & you're losing 1.5-2% a year anyway if you're holding cash. There's no "decent return" without risk, otherwise everyone would be piling into it.

If you have a very low risk profile then you might just about keep up with inflation as you need to make about 3-4% to cover that & charges. Even Premium Bonds barely cover inflation unless you get really lucky.

[Jon39]

digger_R said:

A significant amount of my savings are in cash at the moment (we're talking around 200k) -

People feel comfortable and secure when their savings are in cash.
Long-term it is a dreadful investment, because as mentioned above by Mr Pointy, the one guarantee you have, is that you are certain to lose money. Inflation is the enemy of course and even at the present day low rates, it is still nibbling away at the value of cash.

I favour long-term shareholding (directly not funds) and so over the last 30 years have experienced the ups and downs of the economy. The inevitable recessions can actually be of help to investors in solid businesses. Sit tight but buy some more when everyone else is panicking. It is the only time when you can really tell when a good business has an extremely cheap share price. Has worked for me.

Some think it is something for the wealthy, but my first holding was just £180. Start with one shareholding and gradually build up to 20 or 25 different businesses. Like a savings account you receive income (dividends), but if you mainly have good businesses, the dividends will increase sometimes by a surprising amount.

One company you could look at is Compass Group plc. I have held for years and will continue to do so. Might not be the time to buy now, because the share price has risen considerably this year. Not the most exciting business sector, but that firm has been a steady performer for years and has weathered recessions.

The way to learn is to become involved, but you must always follow common sense rules.

Edited by Jon39 on Thursday 22 August 15:30

[red_slr]

Whilst there is a risk to investing the money you have to make losses of worse than inflation before you end up actually losing money.
If it were me I would be looking at something like Vanguard. Maybe VLS60. Fees are low, you can buy via and ISA and if 60/40 split is too risky you can always consider VLS20.

[Groat]

cough cough......

.....I know one asset class that the recent (still ongoing?) recession didn't affect in the slightest.....in fact, if anything, it benefitted from the nightmare all around it....

[Mr Pointy]

Groat said:

cough cough......

.....I know one asset class that the recent (still ongoing?) recession didn't affect in the slightest.....in fact, if anything, it benefitted from the nightmare all around it....

Well yes for you that's true because you operate at a large scale & clearly are very good at it. Many people just don't want the aggro & find it much more comfortable to avoid the property & rental arena. If you've got 100 properties then you've got a business, not an investment.

You certainly can't say that having just 2/3/4 properties is low risk, which is what the OP wants.

[Gandahar]

Currently there is no recent recession, that is yet to happen yet and when it does house prices, which are over inflated currently, will lead to negative equity. As has happened over time.

I'd keep the 200k in the bank. Even asking this with Brexit still 2 months away is odd. Just wait.

There are no bargains currently and there is a lot of risk matched up to that.

Having said that there is a good bet on one US share I am looking at for October. That's more of a hobby though.

[Groat]

Mr Pointy said:

Well yes for you that's true because you operate at a large scale & clearly are very good at it. Many people just don't want the aggro & find it much more comfortable to avoid the property & rental arena. If you've got 100 properties then you've got a business, not an investment.

You certainly can't say that having just 2/3/4 properties is low risk, which is what the OP wants.

Not really Mr P. I've never been more than mid-scale. And now it's all full management and very well managed too, so no 'aggro', although I do occasionally like to poke my beak in. And btl is both 'investment' and 'a business'. It's investment in an income producing asset.

But the point is, recession doesn't really damage btl, whether you've one unit or a thousand. Can be a bit tougher for commercial with tenants going out of business. But recession doesn't really damage resi letting at all. In fact if anything it creates a bit more demand via domestic repossessions etc. and it actually feels quite secure being in btl when the economy is uncertain or tanking.

Really the only thing that can undermine the btl industry is bonkers legislation, and unfortunately we live in an age of bonkers legislation where very few businesses and industries feel immune from destruction-by-government. Let's face it, they are experts at destroying industries and it is quite possible that if they're determined enough they could completely destroy the property industry. Their silliness has already caused considerable damage to certain areas of it.

But plain and simple economic downturns (also very closely linked to government stupidity) don't really bother landlords. Strangely enough, it's when the economy is booming that the landlord wonders whether the capital wouldn't be better deployed elsewhere.

[Gandahar]

Groat said:

Mr Pointy said:

Well yes for you that's true because you operate at a large scale & clearly are very good at it. Many people just don't want the aggro & find it much more comfortable to avoid the property & rental arena. If you've got 100 properties then you've got a business, not an investment.

You certainly can't say that having just 2/3/4 properties is low risk, which is what the OP wants.

Not really Mr P. I've never been more than mid-scale. And now it's all full management and very well managed too, so no 'aggro', although I do occasionally like to poke my beak in. And btl is both 'investment' and 'a business'. It's investment in an income producing asset.

But the point is, recession doesn't really damage btl, whether you've one unit or a thousand. Can be a bit tougher for commercial with tenants going out of business. But recession doesn't really damage resi letting at all. In fact if anything it creates a bit more demand via domestic repossessions etc. and it actually feels quite secure being in btl when the economy is uncertain or tanking.

Really the only thing that can undermine the btl industry is bonkers legislation, and unfortunately we live in an age of bonkers legislation where very few businesses and industries feel immune from destruction-by-government. Let's face it, they are experts at destroying industries and it is quite possible that if they're determined enough they could completely destroy the property industry. Their silliness has already caused considerable damage to certain areas of it.

But plain and simple economic downturns (also very closely linked to government stupidity) don't really bother landlords. Strangely enough, it's when the economy is booming that the landlord wonders whether the capital wouldn't be better deployed elsewhere.

nothing can be said to be certain, except death and taxes.

The government stealing some of your pie when you want to eat it all yourself ... shocking ....

Buy to let and landlords profiteering whilst there is a housing shortage is only slightly better morally than farm set aside where a good idea has just been turned into a way to make money on the back of a system that is wrong in the first place.

So don't complain your money making scheme is not as lucrative as you would wish, do something else, as you suggested in your last sentence.

[anonymous-user]

For the average Joe, getting into BTL now after all the recent tax rises (stamp duty, no mortgage relief, enhanced Capital Gains Tax) looks a high risk investment.

I can't help thinking OP might be better off watching his money shrink 1.5% p.a. in the bank than punting all his savings at an illiquid investment with high cost of entry, high cost of exit, political risk regarding rent control and security of tenure, void risk (no rent between one tenant leaving and the next arriving) and tenant risk (stops paying rent, damages the property, or both).

Drip-feeding the stock market in an ISA has worked well for many people and I don't think there's any reason to believe that will change. The benefits of tax-free returns should leave investors well placed to weather a future recession.

BTL could still make sense for someone who,

• Doesn't pay much/any income tax
• Is investing principally for income
• Will manage the property themselves, and
• Is never going to sell.

I suspect such creatures are rare.

[Groat]

Gandahar said:

Nothing can be said to be certain except death and taxes.
meaningless cliche

The government stealing some of your pie when you want to eat it all yourself ... shocking ....
I'm sure this must mean something, but I'm just not sure what or to whom

Buy to let and landlords profiteering whilst there is a housing shortage is only slightly better morally than farm set aside where a good idea has just been turned into a way to make money on the back of a system that is wrong in the first place.

Is this a shortage of properties to buy????

https://www.rightmove.co.uk/property-for-sale/find...

...or a shortage of properties to rent????

https://www.rightmove.co.uk/property-to-rent/find....

So don't complain your money making scheme is not as lucrative as you would wish, do something else, as you suggested in your last sentence.

Actually with only a little bit of focus you'll see that I'm suggesting that "my" money making scheme is pretty well recession proof which, if recession is upon us, makes little sense to escape from, as I'm sure you'll agree

[BlackG7R]

red_slr said:

Whilst there is a risk to investing the money you have to make losses of worse than inflation before you end up actually losing money.
If it were me I would be looking at something like Vanguard. Maybe VLS60. Fees are low, you can buy via and ISA and if 60/40 split is too risky you can always consider VLS20.

^^^^This^^^^ If it was my money of course.

[Condi]

Groat said:

But plain and simple economic downturns (also very closely linked to government stupidity) don't really bother landlords. Strangely enough, it's when the economy is booming that the landlord wonders whether the capital wouldn't be better deployed elsewhere.

All very well, but with house prices at record (any many would say unaffordably) highs are you not worried about the underlying asset decreasing in value, given any downturn or increase in house building?


OP - for my money look at investments (shares/funds) in things people cannot do without. I'm assuming that Corbyn and co don't get in, but things like energy, water, etc are required regardless of the state of the economy, and while not exciting, have proven to be steady long term buys.

Otherwise, if you like the idea of property how about a property fund? There are several good ones, which provide exposure to property and yet are far more liquid than buying a BTL, and given the large number of assets under management the risk of no or bad tenants, or large bills are spread across thousands of properties. The downside is paying someone to manage it, but for 0.25%-0.5% per year its not a lot.

[mikiec]

I’d say holding cash at this point of time is a great position with the threat of recession. Sit tight for the next few months and if the markets do dive there will be great opportunities in shares or property.

[Edible Roadkill]

mikiec said:

I’d say holding cash at this point of time is a great position with the threat of recession. Sit tight for the next few months and if the markets do dive there will be great opportunities in shares or property.

When the £ drops 10% minimum upon brexit happening that may be a regret

[anonymous-user]

rockin said:

For the average Joe, getting into BTL now after all the recent tax rises (stamp duty, no mortgage relief, enhanced Capital Gains Tax) looks a high risk investment.

I can't help thinking OP might be better off watching his money shrink 1.5% p.a. in the bank than punting all his savings at an illiquid investment with high cost of entry, high cost of exit, political risk regarding rent control and security of tenure, void risk (no rent between one tenant leaving and the next arriving) and tenant risk (stops paying rent, damages the property, or both).

Drip-feeding the stock market in an ISA has worked well for many people and I don't think there's any reason to believe that will change. The benefits of tax-free returns should leave investors well placed to weather a future recession.

BTL could still make sense for someone who,

• Doesn't pay much/any income tax
• Is investing principally for income
• Will manage the property themselves, and
• Is never going to sell.

I suspect such creatures are rare.

Such a creature here !

Bought 2 x flats off plan in York.

Wife doesn't work so full allowance

Rent on one pays mortgage on both inc management fees

2 x kids who will end up with one each in years to come

I'm sure there were savvier things to do out there but this one fits our set of circs I think.

[NickCQ]

Brooking10 said:

Such a creature here !
Bought 2 x flats off plan in York.
Wife doesn't work so full allowance
Rent on one pays mortgage on both inc management fees
2 x kids who will end up with one each in years to come
I'm sure there were savvier things to do out there but this one fits our set of circs I think.

No discussion in this post of yield or expected returns.

[anonymous-user]

NickCQ said:

Brooking10 said:

Such a creature here !
Bought 2 x flats off plan in York.
Wife doesn't work so full allowance
Rent on one pays mortgage on both inc management fees
2 x kids who will end up with one each in years to come
I'm sure there were savvier things to do out there but this one fits our set of circs I think.

No discussion in this post of yield or expected returns.

Because they weren't a prime consideration.

We are really down in simple "as long as it washes it face" territory given the long term nature and ultimate purpose of the investment. Yield is relatively low at approx 5%. After mortgages and costs wife generates approx £10k of tax free income p.a. which we'll stick into a fund. It's all pretty simple, low level stuff.

As I say there were plenty of other things we could have done and numerous more racy/lucrative investments available if this was about optimum investing.

The point I was making was that in answer to the rare beasts scenario outlined by Rockin earlier there are occasionally such folk around.

Edited by anonymous-user on Friday 23 August 09:32

[Jon39]

Condi said:

All very well, but with house prices at record (any many would say unaffordably) highs are you not worried about the underlying asset decreasing in value, given any downturn or increase in house building?

The property price decline in about 1990 was dreadful, unless you owned outright, or had no need to sell.

Condi said:

OP - for my money look at investments (shares/funds) in things people cannot do without. I'm assuming that Corbyn and co don't get in, but things like energy, water, etc are required regardless of the state of the economy, and while not exciting, have proven to be steady long term buys.

I agree with ‘things people cannot do without‘, as being good assets to own during a recession. However, the energy sector has been an exception to that in recent years. Profitability has gone.

[Integroo]

FT just did an article on this:

https://www.ft.com/content/952d9c50-c405-11e9-a8e9...