With the unpredicted state of the current stock market conditions, a lot of smart people are looking for the safest places for money in a depression because they know anything can happen at any time.
The most common advice a lot of financial advisers will recommend to you is to have a diverse portfolio of long-term and short-term investments that will prepare you for any future scenario.
Owning assets that are able to retain their value during an economic downturn is one of the best solutions to protect your money should another depression strike.
So in this article, we are going to list out the safest places for money in a depression. Read them carefully to properly understand how to protect your money in a depression.
1. Invest in Real Estate
Real estate is one of the safest places for money in a depression, especially debt-free real estate ownership. This kind of real estate holds value and appreciates whether in a depression or in a better economy.
When the 1993 Great Depression hit the world, J. Paul Getty grew his fortune by taking what he had earned to purchase undervalued real estate properties and oil stocks. Five years after, the real estate and oil stock were worth 95% more of what he bought them. Paul Getty used the formula “purchase when everybody is selling, and hold on until everybody starts buying.”
The major thing to consider when choosing a real estate to invest in is the Location. Most savvy investors prefer to invest in real estate that is near universities and colleges because these areas typically weather depressions better.
Real estate housing is in good condition to protect your money if you invest in the right locations. Making wise and calculated real estate investment decisions can help you reap financial rewards from your investment.
Before you start buying your first real estate properties, you have to make sure you conduct a tough real estate market analysis and consult a few real estate professionals in your place.
One good thing about Real Estate Rental properties is that it gives you steady income flow which acts as a huge incentive in your investment. Depending on the location of your property, you could be earning a significant amount of income that can help cover most of your expenses and still make you extra money on the side.
Also, investing in rental properties can provide you with long-term financial security, because of the property’s appreciation in value over time. This is the main reason real estate is the safest place for money in a depression.
2. Buy and store gold
For so many years now, gold has been the center of interest for every prominent saver of wealth. This means if not all, most central banks and ultra-rich people used gold to protect generational wealth.
Investing in Gold is one of the safest places for money in a depression. Based on history, the value of gold only goes up and in worst cases, it remains constant to the price when the economy takes a drastic nosedive.
Even during a better economy, you should buy and store gold in form of emergency fund purposes which will represent at least three months of your living expenses.
Most people choose to store money at home, but they don’t know that inflation quickly reduces the value of cash, while banks may seem like a safe way to save money considering the benefits of saving money in the bank, storing gold is the best decision.
If you invest your money in gold, you’ll be protected from a systematic collapse. It is worthy of mentioning that gold is considered to be the safest form of liquid money. This means you can use your gold in exchange for money or anything in any part of the world and it still holds the same value.
3. Invest in treasury bills, treasury notes, and treasury bonds
We all know that stocks and mutual funds are sure gambles during a depression, default-proof Treasury bills, Treasury notes, and Treasury bonds may be considered as good investments and safest places for money in a depression.
Treasury bills, Treasury notes, and Treasury bonds are issued by the United State government which offer a fixed percentage rate of interest after they mature.
Although treasury bills are short-term investments that take about days or weeks to mature, Treasury notes pay interest every six months and take about two years, three years, five years, seven years, or even ten years to mature. Treasury bonds pay interest every six months and take bout thirty years to mature.
During the Great Depression, people who invested in treasury had a yield return of their investment. Treasury bonds which is a long-term investment returned a yield of 6.04%, while short-term fixed income security bills returned a yield of 3.39 %.
4. Look into foreign bond investments
If you start seeking financial advice from experts on how to protect your money during a depression, most financial experts would recommend you to look into foreign investments as depression-proof investments.
This means that if the country goes into a depression, the value of foreign currencies of other unaffected foreign countries will rise in comparison making foreign bond investment one of the safest places for money in a depression.
For instance, if the United States goes into a depression, the value of foreign currencies such as pounds or euro unaffected by an American depression will rise in comparison.
Some of the well-known foreign bonds that are considered “safe-haven” investments for American citizens include euro-zone government bonds, such as the German bund.
5. Invest in the entertainment and liquor industry
When a country goes into a depression it can cause some hard times for a lot of people, businesses, and industries. On the other hand, those in the entertainment industry actually prosper during economic downturns.
The reason is likely because there is a high rate of stressors and emotions when the economy and market are low causing most people to seek relief through other means such as music, movies, and comedy, and in the process, they consume stuff like alcohol, tobacco, and marijuana.
During the Great depression in 1933, Joseph Kennedy Sr. made millions by being the sole American importer of Scotch whiskey and gin produced by British distillers which increased Kennedy’s wealth from $4 million in 1929 to $180 million by 1935.
On the other hand, Mae West’s sexual display in movies that made her strong female leads that combined wit, grit, and sexuality connection with her audiences, increased her fortune by the mid-1930s, making her Hollywood’s highest-paid entertainer and the country’s highest-paid woman.
6. Keep your money in the Stock Market
Although a lot of financial experts will advise you not to invest in a stock if your country is going into a depression, most of the people that have survived a depression, their investment in the stock market contributed to that.
Have you ever heard the use of the phrase, FOMO? that’s an acronym for, Fear Of Missing Out. The main reason most people are so afraid or unwilling to invest in the stock market during a depression is that they let emotions take over amidst uncertainty and go into survival mode.
Rather than keeping a long-term investing mindset and sticking to that strategy, regardless of market fluctuations, they sell their stock, trying to get out of the investment as soon as possible.
Selling all your stocks during a depression is actually the worst time to sell. You must certainly lose your money if your approach to the stock market is near-sighted, so you have to be very smart and think for long-term stock market investment.
If there’s one thing that is common when it comes to the stock market and the economy in general, is that it fluctuates. Newton’s 3rd law of motion explains it all with the phrase, “whatever goes up, must come down” and vice versa.
There’s always a solution to depression, and those that keep their money in historically strong stocks or buy when the market is low, come out on top after the depression is over. In order to get the returns on your stock investment, you must hold onto the stock for a long-term timeframe, around 20 years.
This is not suggesting that you should keep all of your stocks during a depression. Keeping a large portion of your money in such an unpredictable stock investment method is risky. The best method is to keep the good ones, dump the rest, and invest elsewhere.
8. Consider hedge and other Funds
One of the safest places for money in a depression is by investing in hedge funds, most especially for wealthier people. Investing a portion of your portfolio in hedge funds is one good idea to protect your wealth.
Hedge funds are created to make money regardless of the market conditions whether good or bad. Investing in a foul-weather fund is another good idea to protect your money, as these funds are meant to make money when the markets are in decline.
Considering both cases, these funds should only represent a small percentage of your total holdings as there are other things to invest in, remember, never put all your eggs in one basket.
We have listed the safest places for money in a depression above, but regardless of where you decide to put your money, make sure you make it a long-term timeframe. Take the advantage of a down market as an opportunity to buy.
Instead of selling when the price is low, hold on until everybody starts buying, then start selling at high prices and make returns on your investment.