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4 Secrets to Curating a Recession-Proof Investment Portfolio

Wed, Mar 18, 2020

recessionproof-realestateportfolio-turnkeyrealestateAs a nation, we’re moving through uncharted territory. The first modern pandemic is spreading in the United States. As a result of COVID-19, we’ve seen emergency declarations, travel bans, stock market disruptions, ailing businesses, and canceled events — from sports to conventions and worship gatherings to schools.

There’s a lot of fear in the air. A lot of uncertainty. 

Even now, we seem to be moving towards the recession that was predicted at the end of last year, though for entirely unexpected reasons.

With that said, now is not the time for panic. As with everything, we must be cautious. Evaluating and mitigating risk, after all, isn’t reserved for the investment world.

When we look to a changing market landscape and uncharted territory, it’s crucial that we as investors make the right decisions to tackle the challenges before us.

4 Steps to Achieve a Recession-Resilient Portfolio

Before we dive in, it’s important to know that there is no such thing as a truly recession-proof investment. We can make choices that mitigate the impact of economic conditions on our portfolio, but we will never be truly unaffected. 

However, this isn’t a reason to jump ship.

Don’t panic.

Panic is the enemy. This is true when facing pandemics and it is true when dealing with unfavorable economic turns. What hurts the stock market so much in times like this is when shareholders panic-sell. This only drops the value of the stock further than it would have — not to mention the fact that these sales are often done at a loss, for fear of losing more.

We can’t panic.

Remember, the market — economic, real estate, and otherwise — all move in cycles. These cycles are not always predictable in terms of timing, but they always happen. Depressions, recessions, etc., will not last forever. When you remember this and prepare accordingly, you can outlast any conditions the market throws at you.

Look at the long-term.

Of course, the key here, too, is looking at and investing in the long-term. If anyone is to suffer during a recession, it is short-term investors. Realtors, flippers, and the like will contend with tough conditions for the foreseeable future. The most affected sectors in real estate will be those involved with travel, tourism, and hospitality. 

Be sure to check out: A Turnkey Investor's Guide to Navigating a Housing Recession

If you have vacation rentals, you’ll likely see fewer bookings. The same is true of hotels and, as we’ve seen, attractions like Disney World. 

For investors who target rental properties, the impact is likely to be far less dramatic. The true worries and impact will be on those looking to sell property as well as short-term rentals and vacation homes. 

What we must do regardless is focus on the long-term. As buy-and-hold investors, we are far less dependent on temporal market conditions. Buy-and-hold investors can outlast any financial storm and come out on the other side. 

Choose proven, not speculative, investments.

As technology advances, we see more and more speculative investments — be it Bitcoin, crowdfunding, or otherwise. There’s a temptation we all face: the need to latch on to the new, exciting, and promising opportunities. While this in and of itself is not a bad thing, the best chance we have against times of recession are proven investments. 

Real estate has proved itself time and time again over the centuries to be a safe and stable investment. Exciting? Perhaps not. But because real estate has a track record of success, it’s one of the best bets you can make.

Grow in your risk literacy.

One of the biggest factors in the success of any investment is the effectiveness of its risk management. While no investment is recession-proof, you can take steps to ensure that your investments, even if they suffer in the short-term, reap long-term rewards.

How do investors increase their risk literacy?

  • Educate yourself. Look to news sources, market updates, and reports from your turnkey provider. These will give you scope and perspective beyond your rental properties. To be prepared, we must begin with being aware.
  • Run the simulations. There is a level of speculation involved in risk management. As a savvy investor, look to the future. Do some speculating and “run the simulation” to see where and how things could move. This will allow you to anticipate and mitigate the risk of various outcomes.

Just remember, these speculations must be informed by the context of the industries and conditions that affect them. It will not help to catastrophize. Instead, focus on the reality and the possibilities stemming from it.

  • Trust the professionals. Many real estate investors rely on third-party teams and companies for their real estate success. You mitigate your risk by choosing the right professionals. Do your due diligence when selecting people to work with.

Perhaps most importantly, listen to your advisors. At REI Nation, we are your partners in turnkey success. We truly partner with you to meet your long-term financial goals and invest in your lives and ambitions.

Those who know your portfolio and your goals are best equipped to guide you through market uncertainty so that you can make the best investment decisions not just now, but for the future.

Speak to your dedicated turnkey advisor today!

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Chris Clothier
Written by Chris Clothier

Entrepreneur, writer, speaker, ultra-endurance athlete, husband & father of five beautiful children. Chris puts these natural talents on display every day. As a partner at Memphis Invest, Chris addresses small and large audiences of real estate investors and business professionals nationwide several times each year. Chris is also an active writer, weekly publishing real estate, leadership, and endurance training articles.

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