I don’t buy the fears that a recession is on the horizon but Morningstar’s recent article on how to recession proof your portfolio is valuable regardless of the economic future. Their tips of buying, not selling on a gloomy forecast, dollar-cost averaging, saving, and diversification analysis are important no matter what. That being said, given the forecasts of doom and gloom, the importance of those tips is magnified.
Most important of those tips is the first one, buying and not selling on bad news. The reaction of the market is to over-react on bad news and if your decisions were sound to begin with, the current outlook should have no effect on your long term decisions. If you’re close to retirement, you shouldn’t be in risky positions anyway so with your conservative choices you should be fine in the long haul. Now, given the probably over-reaction of the market, their advice of buying now is something everyone should consider. If you do the analysis and see a sound basis for your investment, a little short term panic is actually like an after-Christmas sale – you get value at a cheaper price because everyone else is freaking out.