Recession-proof your wealth the low-risk way

All signs are pointing to an imminent recession, despite how good the economy looks at the moment. No doubt if you pay attention to the news, you’ve noticed it as well – and you may be asking yourself what you can do to protect your wealth in the meantime.

Of those who have already noticed, they’ve taken specific actions to protect their assets, and it’s not too late for you to do so too – although keep in mind that everyone is different, and no two portfolios are alike.

One financial planner, Ashley Folkes, who is senior vice president of the Arizona based Moors & Cabot wealth management firm, said that the pattern of protecting and growing wealth among the “high-net-worth clients” has become commonplace. However, the way they do so depends entirely on how much risk the clients are willing to take.

She said:

“Currently, I’m seeing the conversations with investors shifting to a slightly more defensive stance.”

Folkes added that “high-quality fixed income and even alternatives” are one way to go in a market that’s volatile. So how do they do it?

Moving away from bonds

According to Business Insider, bond yields seem to have reversed as of August, meaning short-term bonds are more valuable of late, but that’s not necessarily a good thing. Instead of increasing wealth, the increased volatility in the market could mean loss – and a lot of it in a recession. In other words, limit your bond investments to limit your risk of loss.

Keep your cash

Another financial planner, Samuel Boyd, says that holding onto cash is the way to go to “maintain liquidity” and stay recession-proof. Or at very least, mitigate your risk during a recession.

Low-risk ETF investments

Exchange-traded funds (ETFs) are another type of low-risk investment that wealth managers are directing their clients‘ investments. This offers their clients the ability to buy and sell with market fluctuations just like they can do with stocks. Folkes says of investing in ETFs that they could also:

“…Shift more to high-quality dividend-paying companies that have shown historically he can handle prolonged periods of weakness in the market by having low debt and solid balance sheets.”

Reduce debt

A New Jersey financial planner says that those clients who aren’t changing their portfolios to mitigate recession risk are instead paying down debts. By doing so now, clients can save a bunch of money because interest rates are still so low.

Don’t play to emotions

Avoiding knee-jerk reactions is something every wealth manager and financial planner try to instill into their clients. In other words, while protecting your assets is always the best course of action, you don’t necessarily want to reallocate investments simply because the market changes on a whim.

It might be to your advantage to wait out any fluctuations and keep with your original long-term goals after weighing asset allocation, portfolio mix, and tolerance to risk.


Featured Image via Pexels

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