Recession Investment Strategy Considerations

The current economic situation may feel overwhelming and filled with uncertainty. The spread of COVID-19 and the social distancing required to minimize its spread is unlike anything in living memory. We therefore can’t say with any certainty how long it will impact our lives or our finances. But that doesn’t mean you don’t have plenty of options when it comes to managing your money. No matter the state of the market or the economy, financial opportunities always exist. Review these recession investment strategy considerations to help you through this time. 

If you need assistance with your finances, work with a professional financial advisor from Good Life Financial Advisors of Mt. Pleasant. We’re ready to help create a personalized plan for your specific needs.

Know Which Companies Perform Well in a Recession

During a recession, certain types of companies perform better than others. Speculative, highly leveraged companies face greater risk during a recession. That’s because they may not have enough cash flow to cover their high levels of debt, which may lead to bankruptcy.

On the other hand, this is when companies with a strong balance sheet, steady cash flow, and minimal debt often perform well. These high-quality companies can be some of the foremost investment opportunities during a recession. Certain industries, such as utilities or consumer staples, also tend to fare well in a recession, since the products and services these companies provide have less correlation to the state of the economy. 

Wait to Rebalance 

Normally, rebalancing is a useful investing tool. However, during a market crash, it can often hurt you far more than it can help you. A market sell-off negatively impacts the value of your investments. If you sell when the market is at its lowest point, you lose money. You don’t need to avoid rebalancing for the entire length of a recession, but you may want to avoid it during a market sell-off. You may find this especially difficult, since it’s incredibly tempting to join in with the crowd during a sell-off, which brings us to the next point. 

Don’t Base Decisions on Emotions

You see the stock market plummeting. Your portfolio is losing value by the hour. Your hard-earned funds are disappearing. Your gut reaction may be to pull your money out NOW and put it back once things have calmed down. This is a perfectly reasonable desire, but it’s also a great way to lose money. If you take your money out when prices drop and put it back in when prices rise, you have bought high and sold low, which is the opposite of what you want to be doing. This is the time when a knowledgeable advisor can make all the difference. If you’re tempted to make investment decisions based on emotions, speak with your advisor, who can walk you through the most rational steps to take.

Change Your Perspective

We often view recessions in only negative terms, but we don’t have to. While no investor enjoys watching the market drop and the value of his portfolio decline, instead of viewing a drop in stock prices as terrifying and detrimental, you can instead think about it as an opportunity. The same amount of money now buys far more than it did only months before. When viewed in this way, it’s easier to see the financial opportunities a recession provides. 

Remember Your Long-Term Goals

It’s easy to get caught up in the daily or even hourly reports of the market, but if you’re investing for the long-term, there’s no need to. The market has gone through ups and downs, and if history is any indicator, it will continue to have ups and downs. Keep in mind that the long-term trend of the economy (and therefore the market) has been upwards. If you’re saving for retirement or other bigger picture goals, keep these goals in mind. You can’t time the market, but thankfully, you don’t need to. Instead, find a strategy that helps you meet your needs that is appropriate for your risk tolerance and time horizon. 


Diversification is investing 101, but it bears repeating. One of the best ways to limit the negative impact of a recession on your portfolio is to diversify. The key to making the most of diversification is to ensure that you’re truly diversified. True diversification means investing across asset classes, industries, geographic regions, and strategies, not just individual companies. This way, when one region, asset class, industry, or strategy is impacted more heavily by a recession, you limit the impact to your portfolio. 

The Takeaway 

We hope these recession investment strategy considerations assist you. Recessions are often a time of fear for investors, but they don’t have to be. Financially savvy investing is possible no matter the state of the economy. For more advice on how to manage your finances during a recession, speak with an experienced financial advisor from Good Life Financial Advisors of Mount Pleasant.