For months now, experts have been sounding warnings about a potential recession. And while we can't say with certainty that we're headed for a downturn, there's reason to gear up for a period of economic decline.
The Federal Reserve is raising interest rates in an effort to cool inflation. But as borrowing gets more expensive, consumer spending could wane. That could, in turn, deprive a lot of businesses of revenue, thereby spurring widespread layoffs and other unwanted consequences.
At this point, there's really no need to lie awake at night worrying about a recession. What you should do instead is shore up your emergency fund and make sure your portfolio is diverse enough to withstand an economic downturn.
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Of course, what's challenging is that a lot of investors' portfolios are down as of now due to recent stock market volatility. But if that's the case, it could pay to choose investments that are likely to be recession-proof. You may also want to choose companies that pay dividends so you have income coming in at a time when stocks might still be down and economic conditions may be unfavorable. And healthcare REITs fit the bill in both regards.
The upside of owning healthcare REITs
REITs, or real estate investment trusts, are a good investment to hold because they not only have the potential to gain value over time but also are known to commonly pay higher-than-average dividends. And while you don't have to limit yourself to healthcare REITs if this is your first foray into this specific asset, if you have recession-related concerns, investing in healthcare REITs makes a lot of sense.
During periods of economic decline, discretionary spending tends to wane. But healthcare is an expense that's pretty much unavoidable, so healthcare REITs -- companies that own properties such as hospitals and urgent care centers -- may be less likely to struggle with leasing volume even at a time when consumers are cutting back.
Furthermore, the pandemic inspired a lot of people to take better care of their health and be vigilant about medical issues. This means in the near term, it's reasonable to assume that healthcare REITs will hold steady and strong, even if broad economic conditions deteriorate.
It's all about peace of mind
Investing during a recession can be tricky, and it's natural to have concerns about losses in your portfolio. But loading up on healthcare REITs could give you more peace of mind at a time when the economy isn't so stable.
Remember, collecting steady dividends is a great way to offset other losses you may be seeing in your portfolio. And while it's a good idea to reinvest that money as it comes in, you can also use it if a need arises -- say, your hours are cut at work or you end up losing your job. So if you're concerned that a recession may soon be upon us, it could pay to look to healthcare REITs.
