![](https://blog.trive.co.za/wp-content/uploads/2023/01/rece-1024x512.png)
Although difficult to predict, recessions are an all too common feature in our economic model. While we may not be able to predict a recession in advance, what is the best way to invest when you find yourself in a recession?
During a recession, capital flows less freely and is more restricted than in bull markets. As such, fewer people find themselves in a position to take risks and invest in more speculative assets.
For most people, low-cost index funds and ETFs remain the best way to invest during a recession. However, recessions always cause significant compression in the valuations of high-risk assets.
As a result, investors can purchase these assets at a discount. For this reason, many investors love the opportunities that a recession presents them as it allows them to invest their capital into high-growth opportunity assets at a fraction of their previous valuation.
While the risk profile of each approach is different, it is difficult to determine which approach is optimal for every individual as it will depend on their specific psychology and circumstances.
Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.