US stocks are set to take a sharp decline in 2022, but the outlook for 2023 does not look very optimistic. Although experts believe that the new year will not repeat the tragedy of 2008, investors still need to prepare for an economic downturn. For this reason, Barron’s ( Barron’s ) offers a year-end checklist as a reference for the protection of personal assets.
Barron advises investors to start by increasing their cash cushion. According to financial experts, a cash savings account holds three to six months of living expenses. Retirees should hold more cash, ideally with up to two years of withdrawals.
Due to the weak economy, Baron recommends increasing your cash reserves, especially if you work in a company or industry that is at higher risk due to a cooling economy. This helps you avoid racking up card debt or dipping into your retirement savings in the event of job loss or other unexpected expenses.
High-yield savings accounts are a good option for stashing emergency cash, says Rob Williams, director of wealth management at Charles Schwab. Recession or no recession, the plan will work, as long as you keep the money and invest. long-term.
Another suggestion from Baron was to try to rebalance the resources. This refers to adjusting the portfolio so that it returns to your allocation target, such as six stocks and four bonds.
If there are no adjustments this year, the equity position in the investment group may be slightly higher after the stock market crash. Baron stressed that it’s wise to sell some upside targets (winners) at the end of the year, and then use the funds to buy more downside targets (losers), so the portfolio gets back to target.
There’s no obvious winner or loser in this year’s double homicide of stocks and bonds, but it’s still worth rebalancing. Christine Benz, personal chief financial officer at Morningstar, said that although the US stock market is down 20% this year, it’s still up in the past five years, meaning the investment group as a whole is still biased towards actions, which may not be noticed by many people.
Beth Handwerker, real estate and financial planner at James Investment, said now could be a good time to buy bonds, because high-quality bonds usually perform exceptionally well in recessions, such as US Treasuries, which have jumped to the point bright after the financial tsunami erupted in 2008. He recommends holding short-term, high-quality bonds and avoiding high-yield junk bonds.
