Prepare for a Recession with Portfolio Tips from Fortune Magazine
Fortune magazine’s recent cover article “Now What?” provides advice for investing in a weak U.S. economy. On a side note, I see that the article is completely free on their website, which is making me rethink my subscription.
The advice from Fortune:
- Watch your investment fees
- Invest for dividends
- Buy into beaten-down companies, if you can handle the risk
- Consider investing in foreign markets
- Don’t keep to much money in bonds
I would say this is all good advice. Some of it, especially tips like watching your investment fees and investing abroad, are good tips for anytime. Fees can quickly cut into your investment returns, so it’s always important to consider whether your broker is providing enough to justify the cost. And if you’re paying high fees in a mutual fund you really should reconsider switching to low-cost options like those offered by Vanguard. Looking abroad for investments is a great idea, especially when the U.S. economy is sliding. If you use mutual funds, investing abroad is as easy as buying into a fund that invests overseas. Buying individual stocks might be a little more difficult, and is beyond the scope of this post.
One piece of advice that struck me as interesting was to avoid bonds. Typically investors consider bonds to be a safe choice during a recession. But as the article points out, yields on bonds are not in line with the risk you take on, especially considering the amount of inflation. A good choice for bond investors might be TIPS, which protect you from rising inflation (or at least some of it, since inflation numbers seem to be drastically reduced lately. But again, that’s a whole different post).
If you have any money in the markets, it’s worth taking a look at the article to get some ideas for your portfolio.
