Although investors don’t like to think about down markets and recessions, they are a fact of life. Certainly during these times, assets and investments can quickly lose value – sometimes even erasing years’ worth of gains in just a few days. Yet, although recessionary times are typically thought of as negative for investments, there are ways to help protect your portfolio, and even to gain value by following a few simple tips.
First, contrary to what most media outlets want you to think, down markets and recessions are not the end of the world when it comes to your portfolio. So, when you start hearing the news of “doom and gloom,” don’t make any rush decisions regarding the sale of your investments. Remember, assets do not rise and fall based on emotion alone.
A big part of staying calm during recessionary times is keeping in mind your long term investment goals. The market has always been cyclical. But that does not mean that you need to make a move every time the market jolts – whether it’s up or down. Time in the market is much more valuable than trying to time the market.
If you are regularly investing, for instance, contributing weekly or monthly to a retirement plan or are set up with other types of regular deposits, it is important to continue doing just that. This is because, even though your overall account may have taken a hit, you will be able to purchase more shares in a down market as well – shares that you will be able to ride back up when the market gets back on an upward trend.
Insure Your Investments
While there is technically no way to “insure” your investments, there are ways that you can set up your assets so as to be more “recession proof.” One great way to do this is to invest in companies or industries that tend to not only fare well in a recession, but may even thrive.
One such industry is that of discount retailers like Wal-Mart. When consumers begin to tighten their wallets, they will often turn to companies that sell based on “low price.” Often when times are financially tough, individuals seek goods and services from companies that offer less costly items. It is in times like these that brand names may not be nearly as important as simply obtaining necessary goods.
Another way that investors can help keep a tighter rein on their investments is by investing in “safer” offerings such as fixed income types of investments. When investors become more concerned about risk, they are likely to stay away from more volatile offerings and move into assets in the fixed income markets such as United States Treasury bonds.
The Bottom Line
In any case, waiting out a recession can often be difficult for investors. That is why it is imperative to pay close attention to all of your portfolio assets – and to make any necessary adjustments if and when the time comes – ensuring both your investments and your peace of mind for the future.
George Gallagher is an investment and education writer and blogger. He also works with student loan consolidation and recent graduates.