Investing

How should I invest to protect myself against a recession?

Keep your portfolio broadly diversified. In practice, this means investing in several different asset classes, a wide range of industry sectors, and a variety of foreign markets. A conservative allocation model—which, historically, works best in a recession—includes 40 percent in bonds or treasuries and 60 percent in equities, with the latter spread evenly across three or four sectors and 20 to 30 percent in overseas markets. One result of a global economy is that other countries aren’t dependent on America for their goods, so a recession here won’t necessarily be a problem for, say, France. It still has China, for example, which had a bang-up year in 2007, with its Shanghai Composite up 97 percent.

What you don’t want is a portfolio that’s too strong in any one direction. If you’re heavy in tech stocks, for example (an understandable predilection considering their run-up in 2007), consider cutting back and adding some financials, which tanked last year but will likely bounce back this year. Also be sure to invest in sectors that have performed well in poor economic times: health care, pharmaceuticals, agriculture, and anything you see on grocery-store shelves. Foodstuff stocks aren’t as sexy as the biotech variety, but people always need toothpaste.

Bill Strand is a wealth manager with Asset Strategy Consultants in Maple Grove, Minnesota.

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