What do you do with your investments now that there is worldwide recession? While this question may be answered in one of two ways (pull out or ride out), deciding which way becomes difficult. If you ride out, up to when do you suppress your worries? If you pull out, where do you place your money?

In the face of many failed businesses and investments worldwide due to the recessionary times, never has the issue of protecting and preserving your money been more critical. The direct overall effect of recession on the average consumer is to make him cautious with his money. Literally and figuratively, he tightens his grip on every dollar or peso he owns, hoping to ride the situation out until it gets better.

Whether you are tightening hold on a few dollars of remainder income or worried about moneys distributed among a number of investment instruments, your cautiousness is understandable. Generally, the rules of money management do not change just because there is recession. The only change is that your consideration for your instrument of choice will now focus more on safety and liquidity rather than the other salivating factor of yield.

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Where do you now place your money, or move your money if it is already lodged somewhere, so that the effects of recession will not continuously erode its value? This article presents various alternatives.  

1. Cash on hand. Of course, the most guaranteed location for your money is the wallet inside your pocket, but that statement is valid only as fast as it is read. You will be a favorite target of burglars if there is even the slightest indication of large amounts stashed inside your bag or safety box or vault. Securing your money this way does not only deprive you of potential earnings but opens you up to the highest life risk. Do not play 24-hour security guard to your money. Keep only enough for minor emergencies.

2. Bank deposit accounts. Banks are traditionally the first formal institutions of saving after the home. You can either open a  savings account, which serves as a plain depository box for your money with minimal interest earnings, or a no-interest current or checking account, which acts as a plain holder of your money as it is being utilized for business.

Money for daily subsistence is better kept in a savings account with ATM (automatic teller machine) feature. Money for emergency should be deposited in a separate savings account and labeled as such to prevent it from being juggled out.

For a longer lock-in period, usually five years, you can get higher interest via a time deposit account or a certificate of deposit. Or you can participate in your bank’s money market placements and earn a bigger share coming from the money market earnings of the bank. These placements however are not covered by the usual deposit insurance on bank deposits. Funds for immediate or near term use, such as your retirement fund if you are retiring in the next five years, are better kept in these accounts.

3. Life insurance policies. Financial experts concede that next to your emergency fund, you have to set aside some money for your insurance  needs as early as you can. Financial planners identify three foundational   needs referred to as the PEP needs (protection for the family, education for the children and pension for the retiree) that should be given top priority setup.

You can always find a suitable policy for every one of these needs and any amount of money you put into these policy instruments will always be excellently valued at maturity. Remember that the main reason you put your money in insurance is not for any other consideration but for the absolute indispensability of the needs. It is unthinkable to have no money when you retire, or for your family to inherit your debts when you die!

4. Treasury bills and government bonds.  These are fixed-income debt securities issued by the government through banks. Since the issuer is the government, these are almost guaranteed. Treasury bills have maturities less than one year and bonds above two years.

5. Corporate bonds. Private companies seek out loans to finance their operation and they issue debt instruments called corporate bonds offering fixed rate of income for a fixed term. The risks involved in these bonds vary from company to company, and investors can temper those risks by carefully selecting corporations with proven record of stability and growth.

6. Mutual funds and unit investment trust funds (UITF). These are funds that are pooled from contributions of small investors and managed professionally by fund managers. Because of their suitability to small investors, these funds – which are managed by banks, for UITFs, and by mutual fund companies, for mutual funds – are able to gather volumes large enough for maximum investment earnings in selected stocks, bonds and other instruments. Investors may temper their risks by carefully formulating their investment package. These funds are not covered by insurance unlike deposit instruments.

7. Real estate. While the present crisis was precipitated by a real estate meltdown, real estate by itself continues to be a worthwhile instrument for accumulation. Most real estate appreciate over time and if an investor is not impatient, he can age with his property and watch it appreciate in value.

8. Stocks. These are the instruments which suffer the most beating in a down economy. But while stocks go down without exception in a recession, there are certain groups of stocks that can weather the economic depression. It is wise to watch out for those companies with evident growth potential and can qualify to be “great buys” while the market is bottoming out. That is, if you have the extra funds for this investment decision and have the facility to predict the market’s bottom.

9. Business venture. This form of investment is listed last because it is so volatile and carries more than your share of risks found in the earlier forms. While it may be the biggest yield generator of all the forms, it is so risk-rich that you have to be sure you have covered them all before you plunge into one.

How you apportion your resources among these investment or accumulation instruments is largely a personal choice. Most conservative wealth managers and planners recommend following a financial model, such as the hierarchical trigon needs model, where allocations are arranged  by priority needs beginning from the base to the top. Using this model assures you that your funds are substantially protected from undue market fluctuations or even economic reverses.