Pretty soon, those that have failed to prepare for the changing economy are going to be feeling it in their finances. Probably in a much more substantial way than they imagine.
The Shift Has Already Begun
There continue to be debates about when the brunt of the recession will be felt. As well as if we are in a recession versus stagflation. Of course, the data from the first quarter of the year hints that we may already be well into a recession. That is likely to be confirmed by data from quarter two when it is officially published.
Big companies are announcing plans for layoffs to adjust, and if you have any money in the stock market, you’ve probably already seen some damage to your portfolio. Which is just the tip of the iceberg.
Why Taking Action Is So Important
There will be deep losses from staying in the wrong investments and allowing capital to sit idle as cash. Doing nothing, or trying to cling to the sinking ship will only make things direr.
You can just watch your finances plummet. Or you can choose to be proactive, and do something about it.
Whether it is hoarding cash, or staying in the stock market, it will take a lot longer to build back than you imagine.
Remember that a 50% decline in your portfolio value, won’t just take a 50% gain to bounce back. If your portfolio dives to $1M from $2M, then you need a 100% gain to just get back to par. Or around 10 years of 10% gains. That still leaves no net growth, or improvement to offset inflation.
Compare that to ending losses now, and locking in even a modest 10% annual gain, instead of a dip. How much better off will you be in the next 1, 10, and 20 years?
Unfortunately, the majority of individuals sell too late and buy too late.
Must Make Moves To Prepare For A Recession
No matter whether you believe a crash is coming versus a soft landing, or you think a recession is coming next year or is already here, these are the essential moves to make.
Reduce Exposure To Losing Investments
There is zero sense in staying in losing investments that are destined to go down. Exit losing investments now.
Check Your Correlation Ratios
Be sure that you have a variety of correlation ratios between your different investments. You don’t want everything going in the same direction at the same time. At least not in this phase of the economy.
Further diversify to keep your wealth and performance consistent, no matter what the economy throws at you.
Invest For Additional Streams Of Passive Income
Expect some substantial changes in incomes ahead. Whether that is being laid off, losing dividends, or some investments failing to perform.
Establish more new streams of passive income to cover this weakness.
Focus On The Big Picture
Do make money now. There are great opportunities for strong returns out there. Though be sure that you are looking long too. What is going to be strong for you in the next 18 months, and 7 to 14 years. That may be long-term real estate investing, debt investments, or other private equity assets with a strong foundation.
There is no question that the economy is changing. When it comes to preparing for it, time is running out fast. The sooner you act, the better. Make sound moves to avoid losses, and grow your wealth and income instead.