8. Know how to rebalance
Your portfolio will get out of balance in a recession; it's best to know how to put it back on track. If you establish a diversified portfolio with target asset allocations, you want to keep it around those levels.
One way to rebalance is to establish bounds on the percentage of your portfolio allotted to each asset. When assets exceed those bounds, you'll have to sell some and buy others. Opportunities to rebalance are likely to pop up during a recession. Equity values usually decline, which should push you to sell other assets to buy more stocks and rebalance the portfolio.
9. Continue to invest as long as you can afford to do so
You should continue investing in the markets as long as you remain employed. Even if you fear a recession is approaching or that we're already in one, it's best to keep buying. Trying to time the market is much more likely to cause you stress than to generate outsized returns.
Maintaining the habit of saving and investing every paycheck will help protect your budget and give you a greater basket of assets you can draw from in case your emergency fund runs out.
10. Be prepared to lose your wits
Losing a job or watching your portfolio value decline can cause anyone to lose their mind. If you have a plan for dealing with a sudden layoff or what to do if the value of your stocks falls 20%, 30%, or 50%, you'll be prepared to act when you're reeling from the loss.
But be aware that sticking to the plan may feel uncomfortable. The emotional side of your brain can get in the way of the rational side. Preparing for the emotional impact of events that could befall you during a recession is hard. But if you have a plan in place, it will be easier to deal with those feelings of uncertainty.
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