Although the smoke signals of a potential recession are still not definitive, it is clear that our economy has slowed down. With the volatility in the equities market, many investors are holding their funds on the sidelines. However, instead of simply placing your portfolio funds into a low-earning CD, there are several investments that have the potential to grow, even through a recession.

Investing in consumer staples

Regardless of economic conditions, consumers still must maintain minimum living standards, including food and beverages, personal care, and household goods. Shifting your portfolio to these industries, which are recession-proof, can continue to earn you passive income during economically turbulent times.

Choosing large-cap consumer staple manufacturers will yield you equity stability, as well as dividends. Enjoying dividend income in a weak economy is certainly a perk for the passive investors. Some of the major dividend payers include Johnson & Johnson (JNJ), Proctor & Gamble Co. (PG), and Kimberly Clark Corp. (KMB). All of these companies have consistently increased their dividend payouts for the last 10 years – making them an ideal holding for the passive income investor looking to weather economic turbulence.

Choosing the vices

Although not the best “moral” investment, companies that manufacture “vice” products tend to fare well during economic weakness. Indeed, the VICE Fund touts itself as a “recession-proof” portfolio. Smokers and drinkers will continue with their habits as economic woes grow, and in fact, they may increase their vice habits during stressful times.

Whereas gambling was once considered a recession-proof vice, with the credit crunch situation, it may no longer hold its reign. When gamblers do not have money to lose nor credit to borrow, then the casinos’ earnings plummet – as recently seen in the profits demise of major Las Vegas and Atlantic City casinos.

Nonetheless, sticking with “addiction” can yield significant passive income during recessionary times. Diageo PLC (DEO), the world’s largest alcohol maker, along with Altria Group (MO), which is the parent company of Phillip Morris, look to maintain, if not grow, their revenues through economic weakness.

Turning on profitable lights

Energy continues to play a significant role in our economy, growing in its importance because of historically high crude oil prices. Of course, consumers and businesses must pay their energy bills, and thus, the established utilities are a great start, such as Northeast Utilities (NU), who is guaranteed by its public regulators a 13.4% return on its investments.

However, there is also significant potential in the generation of energy, especially with a renewed focus on alternative energy. Keep your eye on this sector, as companies scramble for ways to make renewable energy cheaper than coal. Once this occurs, expect these stocks to soar, regardless of economic conditions.

Caring for the sick

Unfortunately, illness and sickness do not wait for anyone, let alone an economic recession. The need for drugs and medical developments will always drive the health sector forward. When AIDS, cancer, and other debilitating diseases remain without cure, the potential for profit in the health industry is tremendous. Case in point: Gilead Sciences (GILD), who manufactures HIV treatment drugs, rose in price by nearly 50% in the last year.

However, when it comes to the health industry, remember that bigger is not always better. Many of the revolutionary developments come from the smaller firms, whose revenues then increase significantly from product launches, R&D partnerships or buyouts from the major pharmaceuticals.

From consumer goods and healthcare to sin stocks and energy, these sectors can significantly recession-proof your portfolio, while providing you with passive income from both dividends and equity growth.

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