There are many types of investors. Some like to take the riskiest route, whereas others prefer traditional risk-averse solutions. Some are proactive with their investments, whereas others wait cautiously before investing. However, one question that prevails among all kinds of investors is what to do during a recession.
If you, too, have dealt with this question, then read on to know the best ways to recession-proof your portfolio.
Ask yourself the pertinent questions and find answers.
The most basic step to protect your portfolio during a recession is not an investment technique but a strategic practice. Before jumping to action, especially during crucial times like recession, investors must ask themselves if they have the capacity to respond to the crisis.
Ask yourself if you have access to all the pertinent information and recession news and if you have the time and expertise to analyze the recession and its effect on your investment portfolio. If you do not have adequate knowledge or capacity to tackle recession, then it’s best to get in touch with experts at ShiftAltCap.
Taking an uninformed decision during a crisis may badly hurt your portfolio. Experts at ShiftAltCap ardently monitor your portfolio. They have decades' worth of experience in multiple investment avenues and come from diverse industries. Their collective insights and a robust monitoring team will help you float through the recession easily.
Figure out your investment type
Investors usually lean towards one of the below four types of portfolios. Figuring the dominant trait of your overall investment will help you to understand the degree of risk your portfolio will encounter in the recession.
Highly liquid investments – no income or appreciation
Highly liquid – predictable income but low growth or interest
Highly liquid – good appreciation but unpredictable
Invest according to risk tolerance and investment goals.
Scientific asset allocation + proactive management
A recession can be unpredictable and spontaneous. It may not always be cyclic or easy to interpret. Hence, scientific techniques such as valuation theory and proactive monitoring of the entire market are necessary during a recession. Monitoring the market when everything looks bleak is a difficult task. Tackling a crisis may seem overwhelming.
However, proactive management can help to determine important parameters such as the market return of an asset class, global opportunities, and probable market headwinds.
Rebalance or diversify your portfolio.
Let’s say your long-term investment plan and your goals require a certain portfolio composition, such as 50% bonds and 205 equities. However, if a recession brings you the opportunity to de-risk or earns profits through diversification, then it may be a good call to choose this tactical investment solution.