The economy can be hard on your portfolio. This has happened before and it could happen again. Now that we’re officially in a recession, what better time to pump up your resources and shore up your portfolio than to make it recession-proof now or at least weather the tough economic times? Here are some anti-recession tips you might want to consider:
Aim for quality.
If there’s one thing that markets abhor, it’s uncertainty. This is especially prevalent in the way investors behave when faced with companies that produce predictable figures. This is also the reason why investors are loathed to take chances on companies that don’t perform as expected. These companies are usually the small ones, ones that need investors’ faith the most.
To start shoring up your portfolio, try to avoid companies that will rely heavily on you, the investor. It will be easier for you (and safer for your investment) to rely on companies that more or less show predictable growth because this points to better earning quality. Opt for these companies instead, these are usually large firms, big players in an industry that have proven staying power regardless of the economy and have plenty of money to continue to run, do business, pay debtors, produce and make their investors happy.
Invest in health care.
And it shouldn’t surprise you one bit: what the health care industry can offer is a staple among consumers, good health and a means to cure. Unless someone comes up with a miracle cure soon, the health care industry will continue to thrive. Until then, this is one more segment of the market that you might consider putting your faith on.
And yes, the fact that certain segments such as pharmaceuticals pay a lot in terms of dividends doesn’t hurt.
Stick where the crowds are.
By crowds, we mean consumers. Consumers are the lifeblood of economies. Without their support and willingness to spend, economies can crash and burn so easily. As an investor looking to shore up your portfolio, here’s an anti-recession tip for you: invest where consumers bloom.
This means putting your money on industries that cater to the most basic of consumer needs, such as food and beverages, personal care, and household needs. Other than the fact that consumers have been proven to continue spending for basics even during a bad economy, these industries have also performed well during less-than-ideal economic times in the past. You’re less likely to experience disappointment if you go where consumers go.
Recession always brings out the worst, and best, in people, especially investors. Which way you wish to take is really up to you. However, wouldn’t it be better to view the recession as an opportunity to find other means to make money?
If you want to shore up your portfolio and avoid the negative effects of a recession, consider diversifying. But do so only by carefully considering the pros and cons of the industries that you wish to invest in. Focus on industries that have behaved so well under pressure, particularly those that continue to stay steady even during a recession.