The world economies are cyclical, with periods of prosperity
followed by downturns. One of the severe downturns is a recession,
characterized by declining GDP, increasing unemployment, and falling asset
prices.
As an investor, it is crucial to understand how to prepare
for such economic events. Here are seven ways investors can work to protect
their portfolios from the devastating effects of a recession.
#1- Diversify your portfolio
Diversification is a key strategy to mitigate risk. By
distributing investments across various assets, sectors, and geographic
regions, an investor can reduce exposure to any specific economic event or
sector downturn. Diversification may include a mix of stocks, bonds,
commodities, and real estate, depending on an investor’s risk tolerance and
goals. The aim is to balance the portfolio with safer, lower-return investments
and riskier, potentially higher-return investments.
Although diversification does not guarantee greater returns
or against the risk of loss in a declining market, it may be able to reduce the
volatility of your portfolio. Not all strategies or investments are suitable
for all investors. Consult your financial professional for your individual
situation. All investments involve the risk of potential investment losses and
no strategy can ensure a profit.
#2- Maintain liquidity
Having access to cash during a recession is essential. It
offers flexibility to take advantage of depreciated asset prices and can help provide
a safety net if other income sources dissipate. Remember that during
recessions, credit markets can tighten, making loans more challenging to
acquire.
#3- Rebalance your portfolio
Regularly reviewing and adjusting your portfolio helps keep
it aligned with your risk tolerance and investment objectives. During
prosperous times, certain assets may outperform others, changing the original
asset allocation. By rebalancing, the portfolio remains diversified and in sync
with one’s investment strategy.
#4- Invest in defensive stocks
Specific sectors are less sensitive to economic cycles,
often referred to as 'defensive' or 'non-cyclical' sectors. These include
utilities, healthcare, and consumer staples – industries that provide goods and
services people need regardless of the state of the economy. Investing a
portion of one’s portfolio in these sectors may help provide stability during a
downturn.
$5- Pay down debt
Reducing debt before a recession can help minimize financial
stress. Interest rates can fluctuate during recessions, potentially increasing
borrowing costs. Paying down debt when the economy is performing well can free
up more money to invest when asset prices fall.
#6- Keep up with economic indicators
Understanding economic indicators like GDP, employment
rates, and inflation can help provide insight into the economy's health.
Regularly monitoring these indicators can help investors anticipate a potential
recession, allowing for proactive portfolio adjustments.
#7- Maintain a long-term perspective
While a recession can cause significant short-term issues,
it's essential to maintain a long-term investment perspective. Market downturns
are part of the economic cycle, and historically, markets have always
recovered. Panic selling often locks in losses and can cause investors to miss
the market's eventual rebound.
Preparing for a recession involves more than just bracing
for impact; it also consists of setting up strategies to take advantage of
potential opportunities that may arise during the downturn. By following these
steps, investors can navigate economic downturns with greater confidence as
they work toward financial goals.
The acquisition of wealth is a common aspiration for many
individuals and families. However, wealth accumulation is not just about
enriching oneself.
There's another critical aspect often overlooked: the
potential to use wealth to create a lasting, positive impact on society.
Here are some strategies individuals and families can
implement to work toward using their wealth to leave a legacy that ‘does good’
for others.
Philanthropy
One of the most apparent ways wealth and legacy can
intertwine is through philanthropy. Individuals or families can set up
charitable trusts or foundations, contributing a part of their wealth to causes
they are passionate about.
Whether it's funding education, contributing to medical
research, or aiding in poverty eradication, philanthropy enables them to leave
a legacy that translates into better communities and improved living conditions
for those less fortunate.
Influencing policy and advocacy
Individuals and families also have unique opportunities to
use their influence to bring about policy changes for the betterment of
society. Using wealth and connections to advocate for policies that support
social, economic, or environmental causes works toward their legacy of
impactful societal change.
Social and impact investing
Another strategy is to invest in businesses dedicated to
social causes through social or impact investing. This type of investment
involves supporting companies that align with one's values and contribute
positively to the world. By doing so, investors not only receive financial
returns but also help to promote innovative solutions to pressing social and
environmental problems.
Environmental, social, and governance ("ESG")
criteria uses nonfinancial factors to evaluate investments. Incorporating ESG
factors may result in forgoing investment opportunities available to strategies
that do not have similar constraints. As a result, the investment or strategy
may underperform the market or other strategies. Investments are subject to
risk, including the loss of principal. There is no guarantee that any objective
will be achieved.
Creating employment opportunities
Wealth can also be used to create employment opportunities,
thereby lifting many out of poverty and fostering economic growth. By investing
in businesses, individuals and families use their wealth to generate jobs and
enable these workers to work toward an independent future.
Establishing scholarship
Education is a powerful tool that can break the cycle of
poverty. Individuals and families can develop scholarships to support students
who may not have the financial means to pursue higher education. This
investment in potential future leaders can have a profound ripple effect on
society.
Nonprofit involvement
Aside from financial contributions, individuals and families
can lend their time, skills, and expertise to nonprofit organizations. Board
membership, volunteer work, or mentorship all provide valuable support to these
organizations while allowing them to be actively engaged in their cause of
choice.
Responsible consumption
Promoting and practicing responsible consumption is a subtle
yet powerful way to do good. By supporting sustainable, ethical, and fair-trade
businesses, individuals and families can influence market trends towards more
responsible practices, thus creating a positive environmental and social
impact.
Family foundations
A family foundation enables families to institutionalize
their philanthropic efforts. It allows them to have a structured approach to
giving, keep the family engaged across generations, and create a long-lasting
legacy of social impact.
Legacy planning
Legacy planning goes beyond the standard estate planning. It
involves creating a comprehensive plan so that wealth, philanthropy, and legacy
align with an individual's or family's values, even after the benefactors are
gone. This legacy can include leaving assets to charities, establishing trusts
for societal good, or continuing family foundations.
In conclusion, wealth and legacy can be powerful tools for
doing good. Utilizing wealth responsibly and strategically can help contribute
to societal progress, allowing individuals and families to leave an enduring,
positive legacy. Whether through philanthropy, social impact investing,
advocacy, or legacy planning, individuals can work with financial, legal, and
tax professionals to find a method that aligns with their values and passions.
The One Big Beautiful Bill Act of 2025 has a significant
effect on federal taxes, credits, and deductions. Signed into law on July 4,
2025, the "Big Beautiful Bill" has implications for how it impacts
personal and corporate taxes.
The changes it ushered in reshaped the tax landscape,
affecting individuals and corporations differently. Here are some of the key
changes investors and business owners need to know about this new tax law.
Personal taxes under Big Beautiful Bill
One of the key tenets of the Big Beautiful Bill was the
effect it had on personal income tax brackets. Designed to provide tax relief,
it aims to extend benefits across various income levels.
Corporate taxes and the Big Beautiful Bill
The corporate tax structure underwent substantial changes
with the introduction of this law.
The above changes fundamentally alter the corporate tax
landscape. While the reduction in tax rates is a welcome change for many
businesses, other changes require careful planning and foresight to navigate.
As with any tax-related matter, consult with a financial or tax
professional who can provide guidance based on your unique circumstances. The
"Big Beautiful Bill" is no exception, and understanding its
implications is essential for optimizing your tax situation, whether you're an
individual taxpayer or a business owner.
In today's fast-paced world, working toward financial
wellness requires a proactive approach. For many people, this means more than
just saving or making monthly budgets.
Thankfully, there is a wide range of money management apps
designed to improve the way we manage our finances.
Money apps can serve as digital assistants, helping us make
more informed money-related decisions, such as aiding investment choices,
monitoring expenditures, and much more.
Why use money apps?
There are several reasons to use money apps for financial
wellness:
Money apps for financial wellness
You Need a Budget (YNAB) - YNAB uses a unique
approach to budgeting. Instead of forecasting future income, it focuses on the
money available now and how to appropriately allocate it. This app promotes a
sense of financial responsibility and discipline.
Monarch Money – Monarch Money’s app offers a range of
features for budgeting, investment tracking, and financial planning.
Empower Personal Wealth – This app offers budgeting
tools but is primarily known for its investment tracking features. It provides
an overview of one's investment portfolios, helping investors make informed
decisions regarding their investment strategy.
In the digital age, using money apps can help empower you to
take control of your financial future. These apps offer a variety of tools,
from budgeting to investing, making it easier than ever to manage your money
effectively. By incorporating these apps into your financial strategy, you can
work toward financial goals and improve overall financial wellness.
Investment advisory services are offered through Wealth Watch Advisors, an SEC-registered investment advisor. Neither Wealth Watch Advisors or J. Martin Wealth Management, LLC are endorsed by the Social Security Administration or any other governmental organization. Note, registration with the SEC does not denote a certain skill level or guarantee the success of an investment strategy. Wealth Watch Advisors and J. Martin Wealth Management, LLC are independent of one another.