5 Ways to Recession-Proof Your Portfolio

By JLP | September 2, 2006

Is it even possible to recession-proof a portfolio? You can certainly take steps to soften the blow of a recession. This article by Jonathan Burton titled Five Ways to Recession-Proof Your Portfolio offers some things to think about:

1. Think big, buy quality — the bigger a company is, the more resources they have to fight a recession. This DOES NOT MEAN that they wont lose money or that the share price wont go down. However, a bigger company can most likely weather a recession better than a smaller company.

2. Think consumer staples — the economy could go to hell in a handbasket but people still need toothpaste, toilet paper, food and beer to forget it all.

3. Think healthcare — no matter how bad the economy, people still get sick and need healthcare.

4. Think about taking it to the bank — yields on CDs and even money market accounts are now over 4% and some are even over 5%, which isnt a bad yeild.

5. Think international — as the article mentions, be careful to avoid export-driven economies like Asia and Latin America, which depend a lot of the economy of the U. S.

Interesting article. Fortunately for me, Im far enough away from retirement that I dont really need to worry about a recession.

8 Responses to 5 Ways to Recession-Proof Your Portfolio

nukular Says:

Start a TreasuryDirect account. Six month bills are over 5% and, unlike CDs, that are state-tax free.

I started buy XLP around 1 year ago, and it has been one of my better performers in that year. I wish I could have bought more. Oh well.

My only problem with this would be #5. The logic seems ok, but the dependence on the US is not as great as it used to be, I think. I think well see enough strength in other economies to offset US weakness. Not a huge amount, so the offset wont be total (e.g. 1:1) but it will be there. And with a long time frame, I think non-dollar denominated assets are far better to own than dollar denominated ones.

YMMV.

[] Finally, JLP has a good post on recession proofing your portfolio. []

Making your portfolio recession-proof isnt so hard. The really hard part that I think people forget is figuring out when to do it. Do it too soon and youll miss out on potential gains. Do it too late and your moves wont matter much. And then youd have to figure out when the recession is over. Good luck with that

Like you, Im far enough away from retiring that Ill continue with my current asset allocations and ride out any dips.

shamus Says:

Selling cyclical stocks and buying high quality bonds is the typical way to prepare for a recession.

Our country had been so much affected by this Economic Recession. there are lots of job cuts and company shutdowns. We are seeing some signs of economic recovery right now and we hope that it would continue.

during the height of the economic recession, our online and offline business in the US have suffered some major drop in sales. now our sales are getting slowly back to normal.

Our home business was really affected by the Economic recession, we have to cut jobs just to cover up our losses. fortunately, we have already recovered.