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5 Strategies Wealthy Investors Are Using to Recession-Proof Their Portfolios

Matt Wiley | APR 29, 2019

Following a turbulent fourth quarter for the U.S. stock market, many investors are bracing for an economic slowdown.

It’s impossible to predict when a recession will hit, but clues often warn of a potential economic downturn. It’s important to heed advice from investment advisors, as well as take other steps to protect investments.

Here’s how investors are safeguarding their portfolios.

1. Avoiding Potentially Volatile Sectors

Besides assessing their asset allocation and risk aversion, investors take a close look at the sectors they’re invested in. Some experts say sectors that typically perform best during recessions are ones people rely on daily. Historical trends across various sectors are good indicators of where it’s smart to invest before a recession (and which sectors to avoid).

2. Increasing Cash Reserves

If the stock market dives, having cash in a money market account or certificates of deposit (CDs) can help investors’ bottom line. Having extra cash is particularly important for investors afraid that a recession could leave them unemployed for an extended period of time.

3. Developing Passive Income Streams

Smart investors consider dividend stocks, peer-to-peer loans and passively managed index funds that generate passive income on a regular basis. They also look into real estate investment trusts (REITs), which allow them to invest in residential and commercial properties without having to do any hands-on work.

4. Protecting Themselves From Inflation

Inflation can reduce the size of investors’ earnings. Some experts say investors may be able to hedge against inflation by investing in precious metals like gold and silver. Both commodities and Treasury Inflation-Protected Securities (TIPS) can lower the impact of inflation on investment portfolios.

5. The Best Way Investors Prepare for a Recession

A recession doesn’t have to spell doom and gloom for investments. The key is having a plan in place ahead of a downturn. One of the best ways to do this is by working with a certified investment advisor.

These financial professionals can help you with reviewing your asset allocation strategy, rebalancing and finding recession-proof investments to make your portfolio less susceptible to major market swings and economic crises.

Chances are, there are several highly-qualified financial advisors in your town. However, it can seem daunting to choose one. 

This new tool makes it easy to find the right financial advisor for you. Now you can get matched with up to three local fiduciary investment advisors that have passed a rigorous screening process.

Follow These Steps to Get Matched With the Right Advisor for You

1. Simply enter your ZIP code below.

2. After you enter your ZIP code and answer questions about your financial goals, you can compare up to three top advisors local to you and decide which to work with.

3. Enjoy a better financial future!

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SmartAsset - copyright 2018

SmartAsset - copyright 2018