Although no one has said the next economic recession when will the United State. Of course, recessions are a natural part of the business cycle and can even be mild in nature. But considering that our last recession was disastrous, it is natural for people to worry about another economic downturn.
Luckily there are things that all of us can do to prepare for the next recession in the country, no matter when it arrives. We tell you four measures that will help you be prepared for investing in recession.
1. Create an emergency fund
When a recession comes, investment portfolios tend to collapse, jobs become less stable and salary increases become much less widespread. If you want to protect yourself from the effects of a recession, have an emergency fund fully charged with expenses equivalent to six months or more of living expenses if your income is variable. This will give you the option of avoiding liquidating investments with losses when you need cash. It will also give you some reservations in which to sustain you if you lose your job or find yourself cutting your work hours.
2. Diversify your investments
A diversified portfolio is an investor’s best friend, even during periods of economic prosperity. But during recessions, they could make the difference between having serious losses and recovering very well.
A diversified portfolio has a wide range of investments, including individual stocks and bonds, as well as mutual funds or indexed funds. In addition, those assets must be distributed across different market sectors. For example, when you choose your individual actions, you can invest in biotechnology, energy, and retail companies, so that if one of those sectors is successful, it can compensate for losses in another (or losses resulting from a wider market downturn).
3. Get an alternate job
When the economy falls, in general, individual businesses tend to suffer. And this can easily lead to job loss. A good way to protect yourself, therefore, is to establish a solid alternate job while getting a full-time job. In this way, if you lose your first source of income, you will have a second income that you will depend on while waiting to be hired again.
You should also even get a couple of different parallel jobs to reduce the chances of you being totally out of work. For example, you can have your main job as an engineer, design web pages a couple of nights a week, and work as a dog walker on weekends.
4. Reduce your fixed living costs
When your income falls, it becomes more difficult to keep up with your obligations. One final thing you can do to be prepared for the recession is to reduce some of the fixed expenses that currently consume a large portion of your monthly check.
Although the next recession comes this year, the next or a decade later, there is never enough to be prepared. The more steps you take to be prepared, the more peace of mind you will find when the economy inevitably gets worse.