3 Steps I’m Taking to Make Sure My Investment Portfolio Is Recession-Ready

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A recession could be in the cards. Here’s my strategy for being prepared. 

Financial experts have been sounding recession warnings since mid-2022. And at this point, it’s fair to assume that economic conditions have the potential to deteriorate in 2023. In fact, the Federal Reserve itself has told consumers to expect a recession later this year.

That’s clearly an unsettling thought. But there are steps you can take to prepare.

For one thing, you can shore up your savings account balance. Adding money to your emergency fund could make it easier to cope with a recession if you end up losing your job.

It’s also a good idea to make sure your brokerage account is set up for a recession. Here are some steps I’m taking to make sure mine fits that bill.

1. I’m making sure I’m well-diversified

Last year, my portfolio’s value dropped when the tech sector took a major hit. That’s because I was pretty heavily invested in tech stocks, perhaps too much so.

I want to avoid a repeat situation in the event of a recession. So I’m checking my portfolio to make sure it contains a broad mix of stocks. If I see that I’m low on stocks from a particular market sector, I’ll seek to add those.

2. I’m checking to see if my investments are well-balanced

A big reason last year’s tech plunge caught me off guard is that I didn’t realize quite how much of my portfolio was invested in that sector. See, I didn’t start out by loading up on tech stocks. Tech was only one sector of many I was invested in. But through the years, the value of my tech stocks outpaced the growth I saw with most of my other investments. That led to a major imbalance in my portfolio.

I’ve already taken some steps to address that. But I’ll be continuing to monitor my portfolio to make sure it’s as balanced as I want it to be. If I go into a recession too heavily invested in tech, and that sector gets hammered again, it won’t be pretty.

3. I’m transferring in extra cash

It’s easy to look at a recession as a negative event. But from an investing perspective, it has the potential to be a positive one. If stock values plunge during a recession, you get the opportunity to scoop up shares on sale.

That’s something I’d like to take advantage of. And so I’ll be putting extra cash into my brokerage account so the money is there if an opportunity arises.

I’m able to do this because I’m confident that I have a fully loaded emergency fund. If you don’t, it’s better to put your extra money into savings. But because I’m set in that regard, these days, my extra money can sit there waiting to be invested.

Most people would rather not deal with a recession. But the idea of one doesn’t have to be so daunting if you go in prepared. And I recommend making these moves in your portfolio to ensure it’s recession-ready.

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