The almost-a-recession playbook

The almost-a-recession playbook

If you’re like us, you’re sick of hearing the word recession…and we still aren’t even officially in one. (Or maybe we are!

These things are determined retrospectively, unfortunately.) In fact, it’s looking more and more possible that we may avoid a recession all together in the US. Goldman Sachs even put the chances of a recession at a modest 35% in a January analysis.

But here’s the thing about recessions: whether it happens this year or a couple years from now, we are never that far away from the next one. That makes now a good time to brush up on the cardinal rules of investing your way through a recession…whenever the time comes.

• Remember that recessions are normal. Since 1857, a recession has occurred about every 3.25 years! So, getting through a recession the smart way is a good life skill to learn.
  
• Don’t panic sell. In fact, do the opposite: calmly keep investing, especially in those retirement accounts. Remember: you’re buying stocks at a deep discount during a recession. The compound effects of that discount will be huge 20 years from now and could mean the difference between retiring early or not.
• ‍In the past 20 years, seven of the 10 best days in the market happened within two weeks of the 10 worst days. The only way to ensure you participate in the gains when the market comes roaring back (and it always does), is to stay in your seat.‍
• Stay diversified. Only 4% of stocks drive most of the positive returns for the entire market over long periods of time – and you never know which 4% it will be. The best way to capture those returns is to invest in the broad stock market through an index fund or ETF.
• Anxiously checking the market value of your portfolio every day won’t help you get through a recession (mentally) intact. Here’s what will help you: tune up your emergency fund just in case, minimize your tax bill by using tax-advantaged accounts the right way, and keep contributing to savings and investment as much as you can.
  

The Playbook Take

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If this turbulent market made you lose faith in, or even blow up, your entire investment strategy…that was not the right strategy for you. This is where a good financial plan comes into play. It will help you determine the right asset mix, tax management strategies, and risk tolerance so that you can start investing like you mean it. Ultimately, the only investment strategy worth having is one that you can stick with in hard times. Get the personalized financial plan of your dreams, for a fraction of the cost of a traditional financial advisor, here.

To financial freedom and beyond!