A recession is a significant decline in economic activities that lasts for several months and affects things like economic activity and employment.The effects from a recession, whether minor or significant, can put stress on your investment plan. The best way to avoid a negative impact is to make sure you’re prepared, which looks different for everyone. Here are some things to consider:
Recessions can last for months, and nobody can predict how long they’ll last, but after a recession comes a growth cycle. Which is why sticking it out can benefit you in the long run. Leaving the market while in a recession can also mess with your financial plan and make it harder to get back on track later. While it’s hard to separate your emotions from your investments, don’t let a sudden decline make you switch up your plan or leave the market.
Create a Diverse Investment Plan
Having a diversified investment plan could help avoid company specific risk. You can break up your investments by looking into what securities (i.e., equity, debt, or hybrid) the company uses. And to reduce risk even look at mutual funds with different schemes and benchmarks. Be strategic with your plan and make smart investments by looking for high quality companies to invest in who aren’t predicting to have lots of change in the next few years (low volatility) and are apart of developed markets.
On top of having a diverse investment plan, it’s important to have an emergency fund that’s in an account you have quick access to. Having 3-6 months of expenses saved up can provide peace of mind for when the unexpected happens.
Avoid Short Term Trends
During a recession many trends will surface and they aren’t always ones you want to jump on. Continuing with your plan is a solid strategy and can stop you from making a rash decision to try and keep up with new trends as they happen. Stay disciplined and make sure to keep your long term financial goals so you can recover if something were to happen.
Keeping these tips in mind can help you make the right financial choices during a recession and allow your money to keep growing how you’d like it to. Our expert Advisors are here to guide you through these tough times, book an appointment today.