What was the safest investment during the Great Depression?
Many people who owned stocks that went down a lot would have been OK eventually, except they bought on margin and were ruined. The best performing investments during the Depression were government bonds (many corporations stopped paying interest on their bonds) and annuities.
Treasury Bonds
Investors often gravitate toward Treasurys as a safe haven during recessions, as these are considered risk-free instruments. That's because they are backed by the U.S. government, which is deemed able to ensure that the principal and interest are repaid.
Cash, large-cap stocks and gold can be good investments during a recession. Stocks that tend to fluctuate with the economy and cryptocurrencies can be unstable during a recession.
Company | Industry | Return, 1932 to 1954 |
---|---|---|
Electric Boat | Defense | 55,000% |
Container Corp. of America | Packaging | 37,199% |
Truax Traer Coal | Coal | 30,503% |
International Paper & Power | Paper, hydroelectric power | 30,501% |
Cash: Offers liquidity, allowing you to cover expenses or seize investment opportunities. Property: Can provide rental income and potential long-term appreciation, but selling might be difficult during an economic downturn.
For investors, “cash is king during a recession” sums up the advantages of keeping liquid assets on hand when the economy turns south. From weathering rough markets to going all-in on discounted investments, investors can leverage cash to improve their financial positions.
Business titans such as William Boeing and Walter Chrysler actually grew their fortunes during the Great Depression.
Farm Families and the Great Depression
Farmers could grow their own food in large gardens and raise livestock to provide meat. Chickens supplied both meat and eggs, while dairy cows produced milk and cream. Many women had sewing skills and began producing much of their family's clothing.
- John Dillinger. ...
- Michael J. ...
- James Cagney. ...
- Charles Darrow. ...
- Howard Hughes. ...
- J. ...
- Gene Autry. ...
- Joseph Kennedy, Sr. Kennedy, patriarch of the Camelot clan, built up a tidy sum in the 1920s with a hearty amount of speculation, peppered with insider trading and market manipulation.
Domestic Bonds, Treasury Bills, & Notes
Mutual funds and stocks are considered to be a big gamble during depressions. While Treasury bonds, bills, and notes are more secure investments. These items are issued by the U.S. government. They give the purchaser a fixed rate interest once they mature.
What was the best asset to own during the Great Depression?
The best performing investments during the Depression were government bonds (many corporations stopped paying interest on their bonds) and annuities.
Most stocks and high-yield bonds tend to lose value in a recession, while lower-risk assets—such as gold and U.S. Treasuries—tend to appreciate. Within the stock market, shares of large companies with solid cash flows and dividends tend to outperform in downturns.
Some of the most popular items businesses can offer during economic slumps are healthcare services and goods, pet care, baby and child care, food and beverage, and household goods like personal hygiene and cleaning products. All of these categories are considered recession-resistant businesses.
Defensive Industries
Historically, the industries considered to be the most defensive and better placed to fare reasonably during recessions are utilities, health care, and consumer staples.
- Merck & Company, Inc. (MRK) Dividend Yield. ...
- PepsiCo, Inc. (PEP) ...
- Becton, Dickinson and Company (BDX) Dividend Yield. ...
- CMS Energy Corporation (CMS) Dividend Yield. ...
- Xcel Energy Inc. (XEL) ...
- Ameren Corporation (AEE) Dividend Yield. ...
- Amgen Inc. (AMGN) ...
- Thermo Fisher Scientific Inc. (TMO)
Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.
Toothpaste, deodorant, shampoo, toilet paper, and other grooming and personal care items are always in demand. Offering these types of items can position your business as a vital resource for consumers during tough times. People want to look good, even when times are tough.
Bottom line. Moving your portfolio from stocks to cash is an understandable instinct when savings rates are high and there are concerns about a possible recession. But it's important to remember that stock market investments are part of your long-term plan, and selling could have tax implications.
GOBankingRates consulted quite a few finance experts and asked them this question. They all said the same thing: You need three to six months' worth of living expenses in an easily accessible savings account. The exact amount of cash needed depends on one's income tier and cost of living.
Where is your money safest during a recession? Many investors turn to conservative asset classes such as bonds during recessionary periods. Mutual funds may also be a useful area to consider, and so may established, large-cap companies with strong balance sheets and cash flow.
What happens to my money in the bank during a recession?
Deposits Are Protected by the FDIC. This is overwhelmingly the main form of protection that consumers have in case their banks fail due to an economic downturn or other issue. The Federal Deposit Insurance Corporation (FDIC) is a semi-private organization that was created in the wake of the Great Depression.
At the peak of the Great Depression, the unemployment rate was at close to 24.9%. That means that 3 out of 4 adults still had a job. And this was in all sorts of industries—from warehouses to construction to factories to shipyards to schools to offices to theaters to film sets.
Ironically, it was World War II, which had arisen in part out of the Great Depression, that finally pulled the United States out of its decade-long economic crisis.
Most people who happened to have hard cash in the great depression did not plan for the depression but they were the luckiest people during that time. Since no one else had the cash, they could buy houses, land, stocks, bonds, loans etc.
"The average annual income in 1930 for an American individual was a little over $4,800. Sounds like nothing, but if you adjust that for inflation, a little over $4,800 a year in 1930 is equivalent to almost $85,000 annually for the average salary for one person right now.
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