With many leading economic indicators signaling a downturn, investors are questioning what to invest in during a recession that can still earn a return.

U.S GDP fell by 1.6% in the first quarter. And the contraction does not look to be slowing. In fact, the Atlanta FED is now forecasting another 1.6% decline in Q2. Though a recession is not official until the NBER declares one, two-quarters of falling GDP is often viewed as the start.

Furthermore, U.S housing starts fell for the second month to their lowest level since September. Meanwhile, other leading indicators, such as consumer spending and business confidence, are also down.

The signs are starting to align, showing a recession is possible in the near term. Will it happen? Timing a recession is nearly impossible.

But what we can do is prepare our portfolios to manage risk accordingly. Below is a step-by-step guide on what to invest in during a recession and still earn a return.

What to Invest in During a Recession?

Investing, in general, is a challenge. For this reason, many people prefer to hand their money over to a professional. Yet investing during a recession brings additional risk.

As we have seen already this year, stocks do not always go up. In fact, they can fall 40, 50, even 90% or more quickly. When economic conditions slow, businesses generate less money. If earnings growth declines, less cash is left to return to investors.

Meanwhile, higher wages and input costs put further pressure on many companies’ bottom lines. With growth expectations down, searches for recession-proof stocks are skyrocketing.

Are you looking for what to invest in during a recession? Here are a few ideas to help you boost your returns this year.

No. 4 Healthcare

Although the healthcare industry may not be as exciting as the latest growth stocks, it does hold up well during a recession.

For one thing, healthcare is mainly an essential service. You cannot just stop taking your meds because of an economic slowdown. Moreover, you don’t decide when you get sick. It happens even during a recession.

For these reasons, healthcare is a safer area to hold your money. For example, the Health Care Select SPDR Fund (NYSE: XLV) lost 23% in 2008 compared to the SPDR S&P 500 (NYSE: SPY), losing 37%.

Healthcare stocks can be difficult to analyze with varying earnings and uncertain regulation. Here’s one company with several essential life-saving medicines to get you started.

• Pfizer (NYSE: PFE) – One of the largest global drugmakers with a diverse portfolio is getting even bigger. Though PFE stock slipped during the last recession, the company is much better positioned, with eight drugs contributing over $1B in sales.

No. 3 Cheaper Entertainment Options

Though consumers often spend less on entertainment during a recession, there are a few categories that thrive.

With this in mind, there’s a clear trend towards durable children’s toys. For example, Lego set a new sales record in 2008, jumping 38%. On top of this, board game sales climbed close to 24%.

Even though consumers have less to spend in a recession, children’s toys are necessary. That said, below is a children’s favorite toy maker with a collection of brands anyone can recognize.

• Hasbro (NASDAQ: HAS) – With a portfolio of brands, including Peppa Pig, Monopoly, and Play-Doh, Hasbro is loaded with potential. During the 2008 recession, HAS stock returned over 70% over the next three years as demand for children’s and classic entertainment boomed.

For the risk takers, Netflix (NASDAQ: NFLX) was another leader during the 2008 recession. NFLX stock gained over 314% from 2008-2011. Can the streaming giant do it again?

The company is facing a slowdown in growth due to competition. But, with plans to introduce an ad-supported tier, Netflix may be able to regain its footing after falling over 70% from its 52-week high.

Keep reading to learn what to invest in during a recession to boost your returns this year.

No. 2 Consumer Essentials

When it comes down to it, there are a few items you cannot afford to cut out. They are called essentials for a reason. Because in today’s society, you can’t live without them.

For example, a few essentials include deodorant, toothpaste, razors, dish soap, etc. The business below has its hand in nearly every essential product on the market.

• Proctor & Gamble (NYSE: PG) – You may not realize it, but at least a few items in your household you buy regularly are likely P&G goods. For instance, the company owns Old Spice (deodorant), Crest (toothpaste), and Dawn (dish soap), to name a few.

Another company that tends to see higher sales during a recession is General Mills (NYSE: GIS). Though its products are not necessarily essential, they fill a critical role.

General Mill’s cheaper products are a go-to when budgets get tight. For example, the company owns several popular cereal brands (Trix, Reese’s Puffs, Cheerio’s, etc.), convenient meals (Progresso, Betty Crocker), frozen options (Green Giant, Pillsbury), and much more.

Final Thoughts on What to Invest in During a Recession

The stock market may look scary now with many assets in a bear market. But history has shown us although the economy declines, several businesses see higher activity.

Essential services like healthcare, food, and consumer goods remain relatively stable during downturns. For this reason, these are good places to start if you are wondering what to invest in during a recession.

The most important question to ask yourself is, “what will people continue buying regardless?” Then, look at the company and see if they have the brand power to raise prices if needed. Having pricing power when inputs (labor, gas, materials, etc.) get more expensive can help maintain margins.

Finally, while the market is down, it can offer a chance to buy long-term leaders at a discount.