Introduction
Imagine:
One day, suddenly, many economic predictions begin to suggest a potential recession. This news leaves the market trembling. All your safe and valuable assets feel volatile and you’re not sure what to do. Sounds scary, right?
Many of us go through circumstances like these much more often than we think. Is there any good news?
Surprisingly, yes. Firstly, you are not alone in this situation. Secondly, there are ways to weather this storm with your own hard-earned money. Let’s dive into strategic asset management and understand how it works in your favour.The aim of strategic asset management is to multiply your money to protect it during uncertain times, and increase it when the market is booming.
TIMING IS EVERYTHING
We’ve all heard the phrase: “Time is money.” In asset management, time is used as a hedge or a buffer to protect the value of your assets. In a publication by The International Monetary Fund (IMF) in 2023, it reported that the world economy will peak growth at 3.4% in 2022 and then drop down to 2.7% by 2024. While these figures might not immediately scream “recession,” they indicate that there are plenty of red flags.
Waiting until the economy officially enters a recession can be a very costly mistake, leaving you rushing to recover the lost value.
This becomes true when we think of the relationship between inflation and interest rates. While rising interest rates can affect your borrowing expenses, inflation can reduce the value of your assets significantly. It is very important to understand the relationship between inflation and interest rates before making any financial decisions. As the recession vs. depression discussion continues, it’s important to recognise the hazards and act early.
GOING BEYOND SURVIVAL
One of the hallmarks of active investing is its ability to leverage market inefficiencies. By diligently analyzing market trends and conducting thorough research, active investors can uncover overlooked opportunities that passive strategies may miss, thereby potentially enhancing portfolio returns
To play defensive with your assets when the market goes down is instinctive. But that is not the only approach. Sometimes you need to tackle such issues head-on, offensively as well. One such solution is strategic asset management.
Using tools like diversification of your portfolio, rebalancing assets, and investing in recession-resistant industries, you can take command of the situation and earn income on your terms.
BlackRock undertook a study that indicated portfolios diversified across various asset classes (including equities, bonds, and real assets) had a 92% chance of preventing vulnerability in periods of economic downturns. To take the driver’s seat is not enough, you must push yourself to the steering wheel.
RECESSION VS DEPRESSION
Understanding why recession and depression are different is one of the most important questions in financial management. A recession is a decline in economic activity whereas a depression is an extended economic decline. You can make better decisions and assess risks with much more accuracy if you understand the fundamental difference between these two. The recession vs depression debate goes beyond books; it’s a practical tool to prepare for some of the most upsetting economic situations.
ACT NOW!
Let’s crunch some numbers by Morningstar. Global equity markets lost around 40% of their value during the 2008 recession. If you were an unprepared investor then, you made devastating losses which were nearly impossible to recover. Conversely, if you had a good strategy and a diversified portfolio in place, the losses were minimized and it was easier to bounce back. Coming back to 2024 and learning from past mistakes—It is much more profitable to have strategies in place that assure your capital instead of being unaware and panicking. Knowing how to prepare for a recession is critical to making the right decisions.
THE POWER OF DIVERSIFICATION
Diversification isn’t just a buzzword—it’s your lifeline in volatile markets. By spreading your investments across different asset classes, you reduce the risk of any single investment dragging down your entire portfolio. Think of it as a safety net; if one section falters, the others hold strong.
A 2021 report from Vanguard revealed that over 20 years, diversified portfolios holding 60% stocks and 40% bonds yielded better results than those with a complete stock allocation by 2% annually. While 2% sounds less, compounded over 20 years, it amounts to huge sums of money in return.
Taking recession and interest rates into account is also very important when planning a diversification strategy. As interest rates increase due to economic challenges, some asset classes become more lucrative than others, which helps you stay stable during market turbulence.
BESPOKE STRATEGIES
Since each investor’s circumstances are different, customised asset management is pivotal. Our company specialises in developing customised plans that fit your timeframe, risk tolerance, and unique objectives. We provide a solution that is specifically tailored to your needs, whether your goal is to increase your assets, conserve capital, or produce income.
When the COVID-19 epidemic first started, conventional industries like tourism and hospitality suffered, and tech companies rose sharply. Even while the market as a whole suffered, an investor with a well-balanced portfolio that was tailored to contain a good dose of tech exposure may have made significant returns.
Knowing how to use specialised tactics to get ready for a recession creates the difference between just getting by and prospering.
EXPERT GUIDANCE
There are too many variables involved in an uncertain economy to take a chance or do it yourself. Skilled asset managers provide not just years of expertise but also a profound comprehension of economic data, market trends, and risk mitigation techniques. To make choices that keep your portfolio on track, our team leverages real-time analytics and data-driven insights.
Another area where professional advice may be quite helpful is navigating the inflation vs. recession issue. Recessions can occasionally be preceded by inflation, therefore it’s important to modify your portfolio properly. In hard times, knowing interest rates and the recession can help you choose the finest investments.
In the 2008 crisis, customers who worked with a financial adviser were 1.5 times more likely to stick to their investment plan than those who did not, per a survey conducted by the Financial Planning Association. What was the outcome? enhanced long-term performance and a more comfortable journey through challenging times.
CONCLUSION
It is not a matter of “if” but “when” there will be another economic downturn. You’ll be in a better position to protect your money and take advantage of fresh chances the earlier you take action. It could be too late if you wait until the warning indicators start to glow red.
In times of economic uncertainty, Confluent specialises in assisting clients in maintaining and expanding their capital. Our specialised asset management plans are made to keep your money safe, reduce risk, and make sure you’re ready for anything that may happen in the future.
So, what’s the next step? Will you choose to take charge of your financial destiny now, or will you just watch and wait? You need to keep in mind that the clock is ticking. Take immediate action and allow us to assist you in stabilising your money before the onset of the recession.
Ready to secure your future? Contact us today to schedule a consultation and start your journey towards financial stability.
