During the Great Recession of 2007 to 2009, the combined U.S. net worth of household and nonprofit organizations dropped from $69 trillion to $55 trillion. Many people didn’t just stop investing — in the wake of the financial crisis they sold positions in retirement accounts and investment portfolios. By the end of the
crisis, Americans were 20 percent poorer.1 Since then, the study of behavioral economics has emerged as a guide to better managing investments during a financial crisis.2
One way to pick resilient investments during a recession is to consider your own household budget. When we “tighten the belt,” we cut back on discretionary spending and buy only what is necessary. It is for this reason that the consumer staples sector tends to fare well during an economic decline.
However, diversifying investments also helps mitigate portfolio losses during a decline and take advantage of gains during a market upswing. This strategy goes beyond stocks to include a variety of asset classes, such as fixed income and commodities. It’s important to work with a financial advisor to develop a portfolio designed to weather any market environment. If you have questions, we’re always available to help.
Our firm assists retirees and pre-retirees in the creation of retirement strategies utilizing investment and insurance products. Advisory services offered through B.O.S.S. Retirement Advisors, a Registered Investment Advisory firm.. Insurance products and services offered through B.O.S.S. Retirement Solutions. Marketing materials provided by Infinity Marketing Services.
1 Bob Pisani. CNBC. March 7, 2019. “The best way for investors to avoid a $14 trillion hit before the next recession strikes.” https://www.cnbc.com/2019/03/07/how-the-financialcrisis-turned-everyone-into-a-behavioral-economist.html. Accessed April 3, 2019.