How investors can ready their portfolios for a recession: 'You're looking for balance,' expert says
cnbc.comThe odds of a U.S. recession have risen amid an escalating trade war. But most investors should ignore the impulse to flee for safety by exiting the market, financial experts say.
Instead, the best way to brace for an economic shock is by double-checking fundamentals like asset allocation and diversification, they said.
«You're looking for balance rather than casting your lot with any one economic outcome,» said Christine Benz, director of personal finance and retirement planning for Morningstar.
The probability of an economic downturn rose to 36% in March from 23% in January, according to fund managers, strategists and analysts polled for a recent CNBC Fed Survey. A recent Deutsche Bank survey pegged the odds at almost 50-50.
President Donald Trump hasn't ruled out the possibility of a U.S. recession and earlier this month said the economy was in a «period of transition.»
Recession isn't assured, though, and economists generally agree the chances are relatively low.
Trying to predict when and if a recession will happen is nearly impossible — and acting on such fear often leads to bad financial decisions, advisors said.
«Market timing is a bad idea,» said Charlie Fitzgerald III, a certified financial planner based in Orlando, and a founding member of Moisand Fitzgerald Tamayo. Trying to predict market movements and exit before a decline is like «gambling, it's flipping coins,» he said.
When it comes to investing, your strategy should be like watching paint dry, he said: «It should be boring.»
He often tells investors to focus on ensuring their portfolio is properly diversified instead of worrying about a recession.
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