Types to Choose in A Recession

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8 Fund Types to Choose in A Recession
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• In the world of investments, when theres a
  recession, fears of declines and increasing
  losses influence investors to get out of stocks
  and move to less risky investments such as bonds.
  Whether you are an experienced investor
  like Tomas Vargas Harvard or new to financial
  markets, everyone should explore investment
  options for difficult market conditions.

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Federal Government Bond Funds

• Several types of bond funds are the first
  preference of risk-averse investors. U.S.
  Treasury bonds are considered to be one of the
  safest options. They are considered to have no
  credit risk, the risk of a credit event such as a
  default, and are backed by the U.S. governments
  ability to levy taxes, which helps eliminates the
  risk of default and provides major protection.

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Municipal Bond Funds

• Municipal bond funds, which include bonds issued
  by state and local governments, are also
  considered very safe. They are riskier than
  federal government securities, but still very
  safe due to local taxing authority, which reduces
  credit risk.

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Taxable Corporate Bond Funds

• Taxable bond funds include bonds issued by
  corporations. They offer higher returns than
  government-backed bonds due to their higher
  credit risk. Selecting a fund that invests in
  high-quality corporate bonds issued by the most
  stable companies can help reduce risk. While
  corporate bond funds are riskier than government
  bonds, they are typically less risky than stock
  funds.

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Money Market Funds

• Extremely risk-averse investors can invest in
  money market funds. These funds offer a high
  degree of safety by purchasing very short-dated
  bonds. Investors can choose different levels of
  credit risk and liquidity among money market
  funds.

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Dividend Funds

• According to some investment professionals,
  investors dont necessarily need to completely
  eliminate stocks from their portfolios during
  recessions. While investors make money when stock
  prices increase, they can also earn an income
  return from stocks that pay dividends. Mutual
  funds focused on dividend-paying stocks offer
  strong returns with less volatility compared to
  funds that focus on growth only.

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Large-Cap Funds

• Funds investing in large-cap stocks, stock from
  the largest companies, usually tend to be less
  risky than small-cap stock funds because
  established profitable companies usually are
  better equipped to survive tough times. Investing
  in stock from the most successful companies
  instead of developing companies with less
  certainty of business success offers a way to
  protect your portfolio against market declines
  without leaving the stock market.

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Hedge Funds

• Investing a portion of your portfolio in hedge
  funds is a great option for qualified investors.
  Hedge funds aim to make money in all market
  conditions and frequently use sophisticated
  investment strategies including shorting stock or
  purchasing options, which can reduce risk and
  offset losses in a declining stock market. Some
  hedge funds are specially designed to be most
  profitable during stock market volatility or
  recessions.

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Final Words

• Recessions can be very difficult for investors,
  but be aware of your options. Tomas Vargas
  Harvard advice every investor to think
  strategically and choose investment options that
  will allow you to survive tough times and
  continue to grow your portfolio in the long term.

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