Survive A Recession, Think Long Term

How To Survive a Recession

#1 Spread your risk, be diversified.
Investing across the board is way more important during bear markets, when your assets can really get hammered by volatility. Make sure you’ve managed your risk with a diversified, well-balanced portfolio.

#2 Think long term. Recessions are usually short.
Eight out of the ten recessions we’ve experienced over the last 60 years have lasted under a year. The two most recent recessions we’ve had — in 1990 and 2001 — lasted only 8 months each. Though you won’t be able to avoid temporary losses during a downturn, the long term has been much kinder to investments, with returns averaging 10%.

#3 Act conservatively.
Make cautious, conservative financial decisions. Some examples:

• Think of renting until you feel that the property market has bottomed — and it may be a while before it does!
• If you’re buying a house now, apply for a fixed rate mortgage.
• Don’t take on additional debt; pay with cash to avoid the temptation of overspending.
• Make your emergency fund a priority over spending for big items or taking on investments.
• Live within your means.
• Get a full employer match through retirement fund contributions.

#4 Be patient and stay the course.
Lots of people are tempted to bail out on their poorly performing investments when things go south. But they may be jumping the gun by unloading assets that could very well recover nicely once the markets improve. I’ve been whipsawed in the past, and I’m not about to fall into that trap again! Avoid tinkering with your portfolio and acting on emotion.

#5 Consider being a contrarian.
The recession will pave the way for lower stock prices and cheaper purchases everywhere! Why not buy low?

#6 Look into future trends.
You might feel better about the stock market when you realize that it is a forward indicator and tends to track ahead of the economy. So even as we’re steeped in the gloom of the economy, the market itself may already be picking up and recovering. Conventional wisdom states that the market recovers around 6 months before the economy itself does.

#7 Look at valuation.
Recognize that stocks have already deflated. Well-priced stocks won’t have far to fall despite recessionary conditions. The stock market has already gone through some beatings, which makes it less likely to fall significantly further.

#8 Recognize that bad news is already priced in the markets.
With all the unpleasant news that’s been released, a lot of the bad mojo has already been absorbed by the markets. Could it get any worse? Only if the news is significantly unfavorable.

#9 Realize that the markets and the economy have support.
Whether or not you agree that the Fed should step in and “bail out” failing institutions and other financial channels, the Fed’s strategies have worked in the past to turn things around. Also, the economy finds support in the fact that it functions in a global environment.

#10 Don’t fight the Fed.
The actions of the Fed will have ramifications later on. It would be foolish to go against expected trends.

#11 Evaluate your job situation.
If you’re worried about your job, be proactive and look into other options before anything happens. Other tips:

• Beef up your skills, keep your resume updated, explore career changes before the axe falls. Keeping one step ahead of possible eventualities is a good thing but avoid charging ahead and acting without a plan.
• If you do happen to get laid off, file for unemployment benefits right away by visiting this site for more information. You can also review your health care options (such as COBRA or other coverage).

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