Ten Things To Consider When Investing During A Recession
Investing during a recession can be an opportunity to buy assets at lower prices, but it can also be risky. Here are ten things to consider when investing during a recession:
Understand the nature of the recession:
Every recession is different, with different causes and impacts on different sectors of the economy. It's important to do your research and understand the factors contributing to the current recession.
Assess your risk tolerance:
Investing during a recession can be riskier than during a bull market. It's important to assess your risk tolerance and invest accordingly.
Diversify your portfolio:
Diversification is key to managing risk. Spread your investments across different asset classes, sectors, and geographies.
Focus on quality:
During a recession, companies with strong fundamentals are more likely to weather the storm. Focus on companies with strong balance sheets, cash flows, and market positions.
Be patient:
Investing during a recession requires a long-term perspective. Don't panic and sell off your investments at the first sign of trouble.
Look for bargains:
During a recession, asset prices are often depressed. This can create opportunities to buy assets at a discount.
Keep an eye on interest rates:
Interest rates can have a big impact on asset prices during a recession. Keep an eye on central bank policies and interest rate movements.
Watch for government stimulus:
Government stimulus can help lift the economy out of a recession. Keep an eye on government policies and spending plans.
Keep some cash on hand:
During a recession, cash is king. Keep some cash on hand to take advantage of investment opportunities or to cover unexpected expenses.
Seek professional advice:
Investing during a recession can be complex and risky. Consider seeking professional advice from a financial adviser or investment professional.
If you are interested in creating or restructuring an investment portfolio, or if you’d like to learn how to optimise your KiwiSaver fund, please reach out for a quick chat, or complete one of our quizzes below and we will be in touch.
Compound Wealth is a KiwiSaver, Retirement and Private Wealth Financial Advice Firm based in Mount Maunganui, Bay of Plenty.