1 ETF that’s easy to buy in a recession | Personal finance

(Katie Brockman)

As inflation continues to soar, many Americans fear a recession is looming. Although no one – even the experts – can say when or if we will face a recession, it doesn’t hurt to start preparing just in case.

If a recession is looming, it may be tempting to pause before investing. But economic downturns can be one of the best opportunities to invest Afterbecause stock prices are generally much lower.

However, it is essential that you choose the right investments. Not all stocks will survive a recession, and investing in the wrong place could be costly. However, there is one exchange-traded fund (ETF) that is almost guaranteed to recover from a downturn: the S&P500 ETFs.

Why invest in an S&P 500 ETF?

An S&P 500 ETF is a type of investment that tracks the S&P 500 index itself, meaning it includes the same stocks as the index and aims to reflect its performance over time.

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The S&P 500 itself has a long history of recovering from even the worst recessions and stock market crashes. In the past two decades alone, the market has seen everything from the bursting of the dotcom bubble to the Great Recession to the crash of the early stages of the COVID-19 pandemic. Even so, however, the S&P 500 rallied.

This means that if we face another recession, the index is extremely likely to recover from this one as well. And because the S&P 500 ETF tracks the index, it will also rebound.

Keep in mind, however, that no investment is immune to short-term volatility. The S&P 500 is already down about 17% so far this year, and it could drop further if we enter an official recession. However, it is essential to keep a long-term view.

Despite the short-term turbulence, the S&P 500 has thrived over time. In fact, since 2000, it has had returns of almost 170%. By investing now and simply holding onto your long-term investments, you’re almost guaranteed to see positive average returns over time, no matter what happens in the short term.

Is an S&P 500 ETF right for you?

S&P 500 ETFs are relatively safe, and they’re fantastic for risk-averse investors as well as those who prefer a hands-off type of investing.

With an S&P 500 ETF, you never have to choose individual stocks or decide when to buy or sell. By investing in a single fund, you instantly own a small stake in the 500 companies that make up the index. All you have to do, then, is invest as much as you can afford and sit back and wait.

On the other hand, if you enjoy researching companies and selecting individual stocks for your portfolio, an S&P 500 ETF may not be the right fit. Likewise, if there are certain companies within the S&P 500 that you’d rather not own, there’s no way you can opt out of investing in particular stocks with this type of investment.

Also keep in mind that an S&P 500 ETF can only generate average returns. In other words, it is impossible for it to beat the market. If earning above-average returns is a priority for you, investing in individual stocks may be a better option.

S&P 500 ETFs are one of the safest investments to buy during a recession, as they are extremely likely to recover from any downturn. But they are not suitable for everyone. Before you buy, consider your investment preferences to decide if they would be a good addition to your portfolio.

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