10 Recession-Proof Investments for the Risk Averse
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By Anne Brennan,
The Fiscal Times
October 12, 2011

Terrified of losing it all in the volatile stock market? Maybe you should brush up on your art history.

In an extreme example of how art can hold its value in a chaotic financial world market, a $21.6 million Ming vase was sold at a Sotheby’s auction this month, setting a world record. You may not have a Ming vase in your attic, but chances are you may be a little more open to the idea of art--or any low-risk investment--after the wild swings in the stock market.

Of course, risk is all relative. The best thing is to “pick your risk tolerance and stick with it,” says Scott Halliwell, chief financial officer of USAA Wealth Management in San Antonio, Texas. “A lot of people are less risk-tolerant ... but just like a roller coaster, you can’t jump off half-way through the ride.”

A low risk investment is determined by the cycles of the economy and markets, similar to the ebb and flow of the ocean. “You can still watch the waves come in as tide goes out,” says Lance Roberts, CEO and chief strategist of Streettalk Advisors in Houston.

One caveat: “Anything with an inkling of being a safe haven has been highly priced. For example, long-term U.S. Treasuries,” says Joseph Groebl, a partner at V Wealth Management in Overland Park, Kansas.

From old-fashioned cash in the bank to art and collectibles, here are 10 low-risk investments to consider:

1. Art. Art and collectibles (such as cars and jewelry) tend to retain value and appreciate over time, regardless of financial markets, Roberts says. Plus, you have the bonus of enjoying a tangible asset, whether it’s a painting or Corvette, no matter what’s happening in the stock market.

2. Rental space storage. If you’ve ever had to put your stuff in storage, you can understand how some renters leave items in warehouses for decades. “This is a great long-term investment. It doesn’t matter where you live, people don’t want to move their stuff once it’s in storage,” Roberts points out. Another plus, renters aren’t going to comparison shop when you increase rates. According to National Real Estate Investor, self-storage REITS had a 30 percent return in 2010. http://nreionline.com/finance/news/self_storage_reits_0404/

3. Oil and production. “Oil and gas are not going away and will continue to provide steady cash flows over time,” Roberts says. According to Financial News, Black Rock and Franklin Resources have the best investment analysts in the field

4. Multifamily apartments/houses. Because people can’t pay mortgages, and foreclosures continue to rise, many would-be homeowners are turning to rentals. “With the decline of the economy, housing rental needs will continue to rise,” Roberts says. It will be a great investment in the next 10 years, he says.

5. Agricultural land. With rising populations worldwide, the demand for food will continue to rise. The need for agricultural and ranch land will continue to hold value, Roberts says. Leasing farmable land generally yields a five- to eight percent return, he says.

6. Pay off credit card/mortgage debt. People are always trying to get into the stock market, but if you have $10,000, pay off your debt, Halliwell advises. The average APR on a new credit card is 14.89 percent, according to Creditcards.com weekly rate report. Using those dollars to pay off debts provides the equivalent of a guaranteed return in the amount of the interest expense you will no longer be paying, he says. This applies to mortgages too. A mortgage is a “good debt,” but it’s still debt.

7. Education. Recent college graduates contending with a dismal job market may disagree right now, but in the long run, it’s important to keep yourself marketable...and to help keep the job you have. “There’s no way to quantify it in terms of income, but it’s a heck of a return on your money,” says Halliwell.

8. Small cap, midcap, steel, shipping and uranium stocks. “Just because you don’t like them now doesn’t mean they won’t rebound,” Groebl says. After the tsunami in Japan, the global reaction to nuclear power took a clear 180 degree turn. As a result, prices for uranium are low but are likely to rebound. If you can afford to hold the stock, you could get an atomic return.