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3 ways to recession-proof your portfolio

Allworth Co-CEO Scott Hanson shares his advice for protecting your money and investments during times of economic turbulence.


Whether you are a long-time client of Allworth Financial, or just looking for ways to shore up your financial situation, while history shows that the recent market turbulence won’t last forever, it’s tough to ignore, especially when there’s all this talk about a recession.

First, what is a recession?

A recession is generally defined as a significant, widespread, and prolonged downturn in economic activity where we experience two consecutive quarters of negative gross domestic product (GDP) growth.

So, among other things, recessions can make it harder to borrow money and lead to lower wages and higher unemployment.

But after more than 30 years of advising clients, I long ago came to understand that even recessions are not that cut and dried. In fact, the beginning and end of some previous recessions have been so difficult to pinpoint, they were over before the government even acknowledged that one occurred.

And while there are plenty of so-called experts calling for a recession to hit this year, the truth of the matter is, no one can really know for sure when one might officially begin. 

So, recession or no recession, what should you do?

Here are three ways to recession-proof your money and your mind.

1. Stay invested, stay diversified, and stay free of high-interest debt

The Federal Reserve raising interest rates may have nominally bumped up the pennies you are getting from your bank’s savings account (though, even then, you are still miles downriver in the race to keep up with inflation), but even more important is the fact that your debt is probably getting more expensive, as well.

Pay it off.

And while 2022 might have scared some people out of the market, this could well be the worst time of all to sell. I have said it before, and I would not in-fact necessarily mind if these were the last words I ever said: If you sell when the market is down, the only thing you do is lock in your losses.

So, invest (wisely). Save (copiously). Pay down debt (obsessively). And think long term (with the help of your fiduciary advisor).

I am not promising you the end of our collective short-term economic (and market) pain. But here is where that automatic rebalancing kicks in and, most importantly, helps to keep your asset allocation properly diversified.

And that helps protect your money.

Simply, try to see yourself as the tortoise and NOT that hare. (Remember, there’s an extremely good reason that virtually all of us know about that fable.)     

2. Ignore the word “forecast” and always forge ahead

As studies have repeatedly shown, it is virtually impossible to predict market outcomes a month, two months, or even six months in advance. In fact, a significant majority of active investment managers don’t come close to accurately forecasting how the markets will perform in the near term.1

My experience has been, that while admittedly not everyone, certainly most investors are happier if they work with a fiduciary who helps them build a long-range, comprehension investment and financial plan. That would be someone who doesn’t try and “time” the market (as active investment managers do), and who does the worrying and the periodic rebalancing for the investor.

All this means that you should ignore alarming headlines, short-term trends in the market, and the talking heads that tell you that they know something that no one else does. 

They almost certainly do not.

3. Keep contributing to your retirement accounts (if you have not stopped working)

In your quest to prepare for your best possible future financial outcome, right up there alongside staying invested typically comes the fight to ward of behavioral finance (fear). This means making certain that you always continue to add savings to your retirement accounts.

I understand. When the market hits a prolonged downturn, every bone in your body is screaming for you to find a way to protect your money. But as retirement account savings get deposited pretax, it thereby not only lowers your taxable income for the year, but it also grows tax deferred for the future.


When speaking with clients, I often remind them that the most important job I have is to help keep them from making financial decisions from which they cannot recover. Most, but not all, of these mistakes have to do with something that can negatively influence every single one of us: fear. (Especially the fear of financial loss.)

While the statement above about helping clients not make permanent financial mistakes can cover significant ground, during turbulent markets, and even in the face of a potential recession, the importance of resisting fear is as true now as perhaps ever. And that’s because history shows that the market will recover, and any recession will not last.

With that in mind, let us begin 2023 with a toast to that endearing tortoise of Aesop’s.


1 Forget Stock Predictions for Next Year. Focus on the Next Decade. - The New York Times (