Recessions and Rumors of Recessions!
Seems there's talk of a pending recession in most news reports.
Is there going to be a recession?
100% there will be a recession!
When? Who knows, but every financial expert and prognosticator is chiming in on when it is going to happen.
But Jason, how do you know there's going to be a recession?! Because they happen ALL THE TIME.
It's part of the normal business cycle. An economy grows and expands. Eventually it peaks out and has a decline. This decline is a recession. Broadly speaking, it is two consecutive quarters of declining GDP (Gross Domestic Product). Yes, I'd rather have prosperous economic times...all the time. But that just isn't realistic.
Remember this: we just went through the most disruptive abrupt halt in economic history. Definitely in our lifetime. We're coming out of that disruption and there are still imbalances. Supply chain issues combined with surging demand of goods and services. Massive money supply. High inflation. As our economy recovers we will most certainly see a recession.
How do you prepare for a recession?
You plan for them in your long term financial strategy. Focus on the fundamentals that you can control. If you have a long term investment horizon, there are plenty of things you can control.
- DOLLAR COST AVERAGE. This is a strategy where you invest money in intervals over time. To help you from buying in one particular extreme of a market cycle.
- KNOWING YOUR RISK TOLERANCE. How aggressive or conservative is your investment philosophy? Make sure your investments match your tolerance.
- DIVERSIFICATION, DIVERSIFICATION, oh yeah and DIVERSIFICATION. Spread out over several asset classes.
- OWNING QUALITY INVESTMENTS. Make sure you understand what it is your investing in. If it doesn't make sense to you... it doesn't make sense!
- FOCUS ON YOUR GOAL. Why are you even saving all this money?
Is your portfolio "R"ecession ready?