How to Keep Your Portfolio Recession-Proof

The sign of a smart investor, the saying goes, is one that can stay afloat or even profit during a lean economy. The trick is to recognize the changing landscape and adapt to its conditions. If you can determine where growth will occur even during a recession, you can ensure that your portfolio will not struggle during the slower economic times.

Diversification is an obvious choice during a recession. However, you need to not only diversify, but also look at asset allocation within a variety of situations.

For example, look at the stock market. Stocks make up such an integral part of a standard portfolio, it is impossible to ignore this asset in a troubled economy. However, it pays to play smart during a recession. Look for companies that have lived through the choppy waters before and survived. Which companies have a strong track record for continuing to excel despite recession troubles? These opportunities will give you measured security when you need it.

Typically, credit becomes more difficult to attain in a recession. For this reason, you will see higher interest rates on bonds. Stick with well-known bond companies and think short-term to see better gains in the bond market. You want to look for a company that can withstand paying the higher rates and still position themselves for a strong future growth in the marketplace. These companies will demonstrate a better investment during leaner times.

What should a recession-proof portfolio look like? You want to have stocks of companies that are typically big-name, established organizations who will withstand the troubles. Also, look for the short-term bonds from high-quality debt to give you a better return. However, you must also consider assets unrelated to standard financial choices. What other areas can you consider putting your money that is outside the traditional realm in order to maximize your investment? These areas require a higher amount of research and can be unique to the recession. The real estate market, often cited as a superior conservative investment diversification, has proven to be as volatile as other markets. Keep your eyes open for investments that will place your money in other areas to yield growth.

Finally, be sure to follow one of the biggest rules in investing: think with your brain not with your emotions. Don’t fall victim to the psychology of the day. Chicken Little never helped to create a strong financial portfolio and be remaining calm and researching opportunities, you will see the bright spots being ignored by majority of investors for a smarter return over time.

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