3 URGENT OPPORTUNITIES & 2 UNCOMMON DEFENSE STRATEGIES
ARI BAUM, CFP®
WILL A RECESSION ARRIVE IN 2023 AND HOW BAD WILL IT BE? THE THREAT OF RECESSION HAS BEEN HOVERING OVER THE AMERICAN ECONOMY SINCE 2022, AND IT MAY ARRIVE SOON. IF IT DOES, HOW LONG WILL IT LAST AND HOW BAD WILL IT GET?
Losing money is a big fear during market declines, with good reason. Logically, you know that bear markets and recessions come and go, but you still wonder where you should invest, whether you should sell out of the market, or if cash is safer than staying invested.
So what do you do next?
Fortunately, the market has been through tough times like these, and you can steal the secrets of those who’ve used recessions to grow their investments before you.
This personal recovery playbook is designed for hard-working savers just like you who are looking for a way to help recover from a recession.
OFFENSIVE PLAY #1
Use the bucket, not the thimble.
Bear markets tend to make investors, especially pre-retirees, uncomfortable but remember that now is the time when opportunities are available at a discount! Bear markets don’t last forever — in fact, they average about nine and a half months in duration.
You don’t want to miss out on a sale, so you need to keep your eyes open and act fast.
You have the opportunity to:
- Diversify your portfolio with discounted investments that stabilize during a recession.
- Buy investments you’ve had your eye on that were previously too expensive.
- Position for your current age and stage of life while investments are on sale.
Instead of focusing on losses, look for underpriced investments that can help you withstand market turmoil without giving up the growth your investments need for the long term. As Warren Buffett says, “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
OFFENSIVE PLAY #2
Control what you can.
When the next recession will arrive, how long it will last, and how long it will take to recover are all unknowable.
However, that doesn’t mean your money is completely outside your control. You determine:
- How you react to the market.
- What you do right now.
- How much and where you invest.
… and (barring unforeseen circumstances such as illness) you decide if: - Waiting a couple of years may allow you to have the retirement you’ve always dreamed of.
- Working part-time or consulting for a few years may shore up your money.
But you may not need to change anything about your retirement dream, even during a recession if you take strategically timed action while you’re working.
OFFENSIVE PLAY #3
Remain in place during the worst days of chaos.
Selling off all your investments would be a serious mistake, though one that’s easy to make when the market is tumultuous, and your next play may not be obvious to you.
The problem is once you’ve fled to safety, it’s hard to start investing again until the market starts rising, which means you’re buying high. If you want to make the most of the growth potential of the stock market (and stocks are the asset class known to outpace inflation), you need to be invested.
Turn off the financial news if you need to and check your portfolio value less frequently so you’re not tempted to sell your growth assets.
DEFENSIVE PLAY #1
Assess your need for protection.
Depending on when you set up your investment plan, you may be a few years older and close to needing the money that you’ve invested. There are a number of ways that you can be more defensive and protect what you have, while still leaving enough money invested so that you capitalize on the next recovery and bull markets that will materialize in the future.
You might consider:
- Increasing the amount of bonds and cash you own.
- Buying an annuity or other type of insurance.
- Leaving your portfolio alone because you’re properly diversified for your current lifestyle.
While protection sounds good in theory, you do need to pay for it one way or another — in fees or in lower returns over time. Make sure you take the cost into account when you’re thinking about safeguarding your money.
DEFENSIVE PLAY #1
Don’t reinvent the wheel.
This probably isn’t your first market dip, and it likely won’t be your last. However, there is a wealth of wisdom available from those who have (collectively) invested for many years. They know what works and what doesn’t. Many wealthy investors hire financial professionals with experience in chaotic times to help them make the right decisions for themselves and their families.
TV and social media are full of so-called experts and talking heads. You might have friends who report their portfolio moves to you in real time. Only you truly understand your personal situation. Their advice could be way off the mark and even result in you losing money. Instead, talk to a professional with knowledge and experience who can tailor their advice to fit the needs of you and your family.
Run the Right Plays to Retire When & How You Want.
Maybe you have experience with previous recessions, but you’ve never been through one so close to retirement and this time it feels different.
It’s critical to plan right now, so you’re not caught off guard when the market changes. Otherwise, you might miss out on good opportunities or, worse yet, lock in your losses by selling when prices are low.
It’s critical that you think like a wealthy investor, so you benefit during both bull and bear markets. This can be hard to do, especially when you’re close to retirement, so it’s important that you leverage the knowledge of others.q
The content is developed from sources believed to be providing accurate information. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. Consult with your financial professional before making any investment decision. For illustrative use only.
Ari Baum, CFP® is the founder and CEO of Endurance Wealth Partners, with over 25 years of experience in the Financial Services industry. He brings his in-depth experience to Conceive. Believe. Achieve. for his clients.
Securities and Advisory services offered through Prospera Financial Services Inc. Member FINRA/SIPC.Brokerage and Advisory accounts carried by Wells Fargo Clearing Services, LLC.
