5 Rules for Investing in a Recession
The UK economy is riddled with confusion right now and the media are doing their best to strike fear into the hearts of the public. But don’t panic, we might be in a recession but you can still successfully invest by following 5 simple rules.
1. DON’T PANIC!
First and most importantly, don’t panic. Its often an immediate reaction to start selling investments with a sense of urgency.
But depending on how much you bought those assets for you could be selling at a loss.
The uncertainty over the cost of living crisis will continue to cause market volatility, so the key is to focus on longer-term goals and wait to ride out the inevitable bumps in markets.
2. CHOOSE INVESTMENTS WISELY
Find assets where demand for the product or service is relatively insensitive to the economic cycle, such as property or stocks that provide consumer staples like supermarkets.
You might also want to invest in sectors that will prosper whatever the investment climate.
3. TAKE ADVANTAGE OF CHEAPER OPPORTUNITIES
Amid a poor economic outlook, the price of investments may remain low. This means there could be a good opportunity to buy assets at a lower price than previously.
Diversification is key for any investment strategy. If you are in property, then buying in different areas, be it social housing, HMOs or BTLs is crucial for creating portfolio diversity.
Make sure you are comfortable with your risk profile as this will determine what strategy you go for. Often the higher the cash flow, the more cost and potentially risk associated with that.
5. TAKE COMFORT FROM THE PAST
It is always worth remembering that highs and lows will always be part and parcel of investing and that investing for the long term is where you will be better off.
Economic downturns do not last forever. Invest for five years or more, you should be able to benefit from the market recovery if there is a downturn, likewise when there is an upturn you will also benefit the longer you hold your stock.
If you like to learn more, get in touch with one of our team