How to Handle Investments During a Downturn
When there’s a downturn, or recession, in the economy, it may be easy to think that it’s the wrong time to invest due to heightened fears, stress, and uncertainty. However, there are options that may be safer and more beneficial for your investment portfolio, even during times of crisis. Here are some ways to handle your investments and finances during a downturn:
- Set aside funds in an emergency savings account. Before investing, make sure to save money in case you experience a personal or economic crisis. Even if it’s a small amount being deposited here and there, having money on hand during an emergency will help you when it is needed the most.
- Eliminate your expenses. Reduce your amount of debt before investing, especially during an economic downturn. This includes paying down credit cards and loans, and even reducing the interest rate to help pay off the money you owe.
- Be strategic with the companies you invest in. High-risk companies that are unpredictable or not yet well-established should be avoided during a crisis. It’s best to choose companies that are low in debt, well-established, and have a steady stream of income.
- Invest in a wide variety of stocks and bonds. Diversification is a low-risk strategy that may help you increase the value of your investments over time. Avoiding large concentrated positions and investing in a variety of companies may help provide a more stable, steady increase in your return.
- Do what is best for you and your situation. Everyone’s life circumstances are different. When creating your portfolio and deciding to invest during an economic downturn, think of what is best for you and your financial goals.
While an economic downturn may be stressful, you can still choose to make wise decisions when it comes to investments and finances.