3 Strategies for Recession-Proofing an Investment Portfolio

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Economic recessions can really hurt your investments, especially if you wait until the last minute for you to learn the ropes of protecting your portfolio. While investors can’t predict when a contraction will happen, you might notice that potential indicators precede an economic downturn.

For you to protect your real estate investment portfolio from the impact of a recession, it’s essential to consider the following techniques.

1. Reevaluate Asset Allocation

First, when you recognize the signs of recession, you may need to consider asset allocation. Subsequently, assess the nature of your investment—whether aggressive or conservative. It’s important to scrutinize some of the sectors you have invested in and ascertain which ones are likely to perform better than the others during a depression state.

According to experts, sectors that perform well during a recession are those that people can’t do without daily. Hence, by analyzing historical trends of various segments, you can have a good idea of how you should invest and protect yourself from a recession.

2. Portfolio Rebalancing

Primarily, portfolio rebalancing protects you from vulnerability arising from undesirable market trends. Furthermore, it also ensures that your risk is within your control environment. Thus, re-allocating a portfolio offers protection for any investment strategy both at the retail and professional level.

3. Identify Recession-Proof Investments

Rental properties are a great investment choice during a recession. While their value might drop, they provide a steady stream of income that you can tap and invest in new properties. Although it might take some time, the additional asset’s value will appreciate as the recession subsides.

The Bottom Line

In a nutshell, in the eventuality of a recession, you need to focus more of your energy towards limiting your exposure and thus control the impact it has on your portfolio. And while you may need to avoid risky investments during the recovery period, it’s also vital to set aside capital that you can use to invest in other properties as you recover from the recession.

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