How can I recession-proof my investment strategy?
“Mike Tyson once said, ‘Everyone has a game plan until they get punched in the face.’ Every recession is just that—a financial punch in
Since World War II, there have been 11 recessions, coming about every 7 years on average. The longest stretch between recessions was 11 years (1990-2001). Given that the Great Recession started in
I won’t make any recession predictions here, but when the market has wild swings, as it did at the end of 2018, panicked investors’ urge to dump stocks that lose value is understandable. But investors and advisors alike
Tune Out the Noise and Tune in to Logic.
There are basically two ways to
Have a Game Plan.
It starts with understanding the minimum acceptable rate of return you need to reach your financial objectives, now and after retirement—whatever the Noise or the state of the markets is. For example, during the year-end holidays of 2018, as the markets gyrated, a panicked client called me asking, “What we
We have balanced your portfolio with 50 percent bonds and 50 percent equities. The fixed rate on the bonds should give you 10 to 15 years of necessary income without you needing to touch your equities. So, unless the turmoil in the market or a recession presents an investment opportunity, we will leave your equities alone until the storm passes.
That had always been her game plan, and once I reminded her, she felt much more comfortable about the recent market volatility, because her game plan works!
Integrate Your Investment Strategy with Your Financial/Retirement Plan.
Mike Tyson once said, “Everyone has a game plan until they get punched in the face.” Every recession is just that—a financial punch in the face. And people who manage their own investments, or “DIY investors,”
We then create a strategic asset allocation per client, like the 50 percent solid equities and 50 percent conservative fixed income in the example above. During a recession or market correction, the allocation may go