How to Adapt Your Portfolio for a Recession

Financial experts are increasingly urging investors to prepare their portfolios for the possibility of a recession. The Fed’s successive increases in interest rates and runaway inflation continue to fuel discomfort about the economy’s performance.

Luckily, there are some proactive portfolio moves you can make to prepare if a recession is coming your way. Here are four tips that we believe can help you ready yourself for an economic downturn:

Don’t Panic Sell

It is hard to keep your emotions from getting the best of you, especially when investing in a bear market. However, selling your stocks during market lows will only lock in your losses.

We recommend reallocating your assets gradually. Remember the reasons that pushed you to choose your current investments. Whether to protect your principal investment amounts or earn the maximum returns, the goals and objectives you set should guide you on buying or selling some of your assets.

Take This Time to Evaluate Your Accounts

The market dips may provide an excellent opportunity to evaluate the different accounts you hold. You should also look into each of your accounts' status, including retirement and emergency savings, as well as any other investments you might have.

It is an excellent time to actualize your previous employer's 401(k) rollover. A rollover to your new employer or a traditional IRA allows you to keep your retirement nest in one account. This consolidation can make it easy to track your investment performance and reduce the management fees paid.

Assess Your Investing Progress

The market fluctuations that come with a recession can lead investors to question whether they're doing enough for their long-term goals or if they should be changing their approach entirely. You should determine how much you need to retire and your timeline to hit that goal.

Remember the 4% rule of retirement. It can help prevent you from draining your account too quickly during the economic downturn. You also need to assess how much risk tolerance you have and determine whether your portfolio needs adjusting.

Have a Winning Portfolio Game Plan with Both Offense and Defense

Like most investors, you have a good understanding of your investment goals and a plan for both your offensive and defensive portfolios. Stocks and stock mutual funds are a more aggressive form of investment currently. You can consider buying companies at a discount or investing in the utilities and consumer staples indices.

If you are more risk-averse, we recommend bonds. As stock prices plummet, bond prices recover, allowing you to recoup the losses incurred during the dips. The safest investment choice in the current market conditions is a Fixed Index Annuity. You can use one to earn a guaranteed return despite the bad year.

Recession-Proofing Your Portfolio

It’s possible to come out of a market downturn stronger than before. To do this, you'll need to be prepared for both an offensive and defensive approach.

You should evaluate your account holdings and ensure they align with your objectives and risk tolerance. Most importantly, we recommend speaking with a qualified financial advisor before taking any drastic measures.

For more information, visit: Ty J. Young Wealth Management

Follow Us

Subscribe to Our Newsletter

What's Next, Updates & Editorial Picks In Your Inbox

© 2017-2021 Advisors Magazine. All Rights Reserved.Design & Development by The Web Empire