There have been several occurrences of recession in the world since 1790. In the economics world, recession is defined as the general downturn that occurs in any kind of economy. Several characteristics are associated with recession in the present world. Such characteristics include high rates of unemployment, increased poverty, high inflation levels, as well as a slowdown of the gross domestic product growth (Dougherty, 1). According to Lester (pp 15), recession is defined as a period where there is an economic decline, which is often accompanied by a fall in the stock and housing markets. However, he considers a recession better than a depression. Recession is generally blamed on the federal leadership in the United States. The world experienced a recession in 2008; this has commonly been referred to as the Great Recession, or Recession of the late 2000s. This recession was caused by the well known Financial Crisis of 2008. It is considered to be the world’s worst recession since the 1930s when there was the Great Depression. The crash of the stock market in August 1929 marked the beginning of the Great Depression in the world, which lasted for four years ending in March 1933.
In my view, my client should begin investing now despite the effects of the recession in the country. However, my client must be very selective about the places to invest and the risk to take during the investments. Instead of waiting for safer times, which may not come as soon as expected, the client can go on to look out for recession-proof investment opportunities in the present market. First, I would advocate for corporate bond funds. One of the major advantages of a corporate bond fund is that the risk that comes with it decreases substantially as compared to a single corporate bond. Secondly, my company could go for Real Estate Investment Trusts (REITS). Currently, REITS are considered to have performed poorly in the market. However, an investment in real estate is paying high dividends with the advantage of having a low correlation. This offers this investment a huge advantage during the recession times. In case of a fall in the stock market, REITS will not go down due to its ‘low correlation’. In cases where these two options appear too risky, my client may opt for government investments; these include Treasury bonds and Treasury bills. Treasury bonds and bills are considered to be the safest modes of investment at the moment.
In my approach for the best choice of investment, I advocate for a risk assessment procedure on all investment options before settling for a single one. Risk assessment involves a close and thorough observation on the present happenings in the investment options. For instance, before a client settles for one of the options advocated, it is important to consider the risk levels on all the investments. Any risk level that goes beyond a reasonable percentage should not be adopted. It is important for the investor to pick an investment plan that offers the lowest risk on investment.
Lester, Andrew. Growth Management: Two hats are better than one. New York: Palgrave Macmillan, 2009. Print.
Dougherty, Conor. Recession takes toll on living standards. Wall Street Journal, September 11, 2009