Investment Strategies : Help During Recession
If you are investor then you may worry about the word “Recession”. During, Recession Most of the Investor Loss their wealth by more than 60%, Inflation also surge which make them Depress. But there is the way from which you can reduce Loss and make good return in long term Even in Recession Period. Most of the Investment firm ( including big investor ) diversify their Portfolio In such a way that their Loss is Minimize and Maximize their Return in Long Term.
“How to Diversify Portfolio”
Diversification is depend on your Risk and Expected Return, you can also contact to your financial Advisor. But, most of the Big Investor prefer their Diversification in 60/40 ratio i.e. 60% investment is in Stock and their 40% is in Liquid Asset. There are many types of Liquid Assets like Gold, Bond etc….
When their is Recession, Government Come up with some Actionable Moves for controlling Recession. one of these is 1: Federal Reserve decrease Fed rate to increase liquidity in the market as the result the inflation increase rapidly. Moreover the interest rate of the bank reduce and you get less interest on your saving account and hence you are not going to deposit money in your Saving Account. In the End Flow of Money in the Market are Reduce.
Due to lower return from the saving account and in fear of the inflation money move to liquid asset like gold, Bond etc… Hence the value of the gold and bond increase. Let’s understand by the Historical data.
Gold VS S&P 500
As per the chart we can see that whenever stock market (S&P 500) crash gold price hike and when the market goes high gold price decrease, Moreover in long run both gives good return. The evil of the investor is the emotion.
S&P 500 vs US Gov’t Bonds
As per the chart we can see that when stock market (S&P 500 )crash the return from US Bond increase, which can save your portfolio from huge loss and give good return when market get Recover.
By doing diversification you can minimize your loss and can maximize your profit in Long Run, Moreover you would not get Depress at the time of Recession with the help of Diversification.