Protecting Your Wealth During a Recession
While recessions can be challenging times, they are a part of the normal business cycle and can be expected to occur periodically. If you know how to prepare yourself for a recession, you have a better chance of remaining financially stable and may have the opportunity to build your wealth.
What Is a Recession
A recession is considered to be two consecutive quarters of negative economic growth. It may last from just a few months to several years. Typically, unemployment rises quickly and retail sales decrease as consumers tighten their spending. Recessions are part of the normal economic cycle.
What Causes a Recession
Many things can contribute to or exacerbate a recession including:
- Major economic shocks such as a global pandemic or war.
- Excessive systematic debt resulting in widespread defaults and bankruptcies.
- Significant market bubbles such as inflated stock markets or real estate markets.
- Excessive inflation or excessive deflation.
- Technological or market changes leading to economic model shifts.
Protecting Your Wealth
Historically, all market setbacks have been temporary with markets recovering to newer highs. Every recession has been followed by greater economic expansion. But how do you protect your wealth during a recession? There are a few things you can do ahead of time and during a recession to secure your finances.
What You Can Do
- Adhere to or where possible, decrease your spending budget.
- Maintain your emergency fund.
- Pay down as much debt as possible.
- Do not take on new debt or create new expenses.
- Maintain your long-term investment perspective.
- Diversify investments so they do not all react similarly to the same market conditions.
- Invest in dividend-paying equities, which often provide the greatest return during a recession.
Don’t Overreact During a Recession
Do not panic.
Often, the best way to invest during a recession is to just stay the course and maintain your long-term perspective.
It may be tempting to abandon your investment strategy and/or exit the stock market at the onset of a recession. However, it is best to maintain your long-term investment focus to avoid being out of the market and missing out on the recovery.
Build and Protect Your Wealth with Bloom Investment Counsel, Inc.
We know it can be challenging to plan for the future when economic uncertainty is at an all-time high. That’s why we’re here to help you build and protect your wealth during all market cycles.
Our strategies are tailored to help you secure your financial future, no matter what lies ahead. Contact us to learn more about protecting, preserving and building your wealth. Give us a call at +1-416-861-9941 or email us at email@example.com
This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.