11 Ways to Recession-Proof Your Stock Portfolio

If you’ve been listening to the news of late, you’ve probably noticed that President Trump has started to enact some seriously damaging kinds of policies. Economic experts have shown that lax regulations to financial institutions like banks and lenders are linked to major recessions, including the Great Recession of 2008. Trump’s policy on taxes isn’t much better.

As time passes and regulations continue to be put forth, more people are beginning to worry about a looming recession. That being said, there’s some good news along with this bad news. Knowing that there will be a recession means you can recession-proof your stock portfolio before things hit the fan.

Wondering how to trim the fat? You’re not alone. History and research suggest that doing these things will minimize the shockwave of a sudden (but not really so sudden) recession.

First off, don’t stop investing

Here’s something that you might not have realized about the last recession—the stock market recovered before the jobs market did. Though you might see the value of your investments dip, once the recession ends, chances are that they will recover after a couple of years. The ones who lost the most were the ones who decided to stop investing altogether after the market crashed. A person checking stock market prices on their iPhone
Photo by William Iven / Unsplash

Come up with a strategy and stick to it

This is important. If you fail to plan, you really do plan to fail with stocks. A good way to handle a recession is to stick with a nice variety of funds (rather than individual company stocks) and to continue buying them throughout the recession. As the market picks up, you will notice that any losses you took will average out.

Think about what people need the most during a recession

If you want to minimize loss, you will need to invest in things you know people will want to buy. For example, investing in companies that deliver food, clean water, or transportation would be a wise choice.
Photo by Ethan Sykes / Unsplash

Start saving up a nice, large wad of cash

The best deals and the best investments are often the ones that happen during a recession. Saving up cash, or taking time to prune your investments, is a wise choice. The more cash you have, the better prepared you are.

Keep an eye on other income routes, in case your job gets cut

For an investor, the worst thing that can happen during a recession is to lose your primary source of income—and that can happen pretty quickly. If you haven’t already, start looking at multiple streams of income in a variety of different industries. It will help a lot, even if you do keep your job.

Micro-investing apps could be your saving grace

If you need to figure out how to recession-proof your portfolio and don’t have much time to actually read every little prospectus on your desk, you might want to consider micro-investing apps. These allow you to invest your spare change into funds managed by professionals who spend their days finding good investments. Better still, a lot of them could let you invest with as little as a dollar.
A one dollar bill leaning against the wall on a glossy surface
Photo by NeONBRAND / Unsplash

Consider looking towards an investing mentor

The easiest way to mimic the success of the successful people out there is to copy what they are doing. Warren Buffett and other major billionaire investors have weathered the storm many times. Taking a cue from him would be a wise decision.

If you’re thinking about investing in a stock that’s been around for a while, make sure that their marketing is up to par

Historically, the companies that are most aggressive with marketing tend to fare the best during a recession. Companies that don’t advertise, on the other hand, tend to belly-up during times of trouble.

Consider buying inverse market ETFs

With most stocks and funds, you’ll see their value go up as they go up. With inverse market ETFs, the value is inversely proportional to the market. So, during a recession or a crash, these stocks will go through the roof.

Avoid peer-to-peer lending during times of recession

Investments like peer-to-peer lending only work if the borrower will pay back the money they owe. During recessions, even the most willing borrowers might lose their job and be unable to pay. This leads to higher defaults, which in turn, can be a pretty nasty loss.The American one dollar notes under low lighting.
Photo by Aidan Bartos / Unsplash

Finally, if you are really risk-averse, stick to bonds and other government-backed investments

When in doubt, go for low-risk investments that you know have guaranteed returns. It’s the easiest way to make sure you won’t end up losing money during an economic downturn.