The first thing to consider: what exactly is in your ‘portfolio’?įor most individuals, this will be a 401(k), an IRA (either Roth or traditional), and maybe a secondary brokerage account.
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(Warren Buffet famously advising to “be greedy when others are fearful.”) How to Allocate Your Portfolio During a Recession
While some investors choose to double down on what they see as stocks selling on discount. However, during a recession (or in anticipation of one), investors often choose to reallocate their portfolios toward less risk, to try to mitigate losses. The other strategy is to save towards a specific target goal, and transition to a steady income based model once you’ve reached that goal. Less than 10 years is when it’s recommended you start phasing in more stable assets-like government bonds and mature high-dividend-yield stocks. In general, an investment timeline greater than 10 years would be geared towards high-risk, high-growth opportunities (this is considered long enough to wait out any market downturns). To evaluate your risk tolerance, the most important thing to consider is your timeline for when you’ll need the money you’ve invested. Risk tolerance will form the basis of any well-balanced investment portfolio.
High risk tolerance allows for more growth (but may result in short term fluctuations in your net worth), whereas less risk tolerance means you’re more insulated from market factors-including downturns. Risk tolerance is the main foundation for how portfolios are evaluated. If the coronavirus has left you wondering what you should do with your investments, here’s how to take it step-by-step: Knowing Your Risk Tolerance The good news: Even though a worldwide pandemic is certainly unprecedented, unpredictable economic times are not-and there is a roadmap to protecting your investments. This volatility and uncertainty can feel especially daunting if you’re planning to retire in the near future. With businesses and states shut down in varying degrees, unemployment in the double digits, and a stock market that swung from record highs in February to a 35% drop a month later, being an investor is as unpredictable as it’s ever been. If you've been monitoring your investment portfolio lately, you’ve likely had some anxiety.