Recession worry? Protect yourself but don’t panic

If the threat of a recession gives you pause when it comes to your personal finances, remember now is a time to prepare, not panic.

Worries about the economy increased this week when a fairly reliable recession warning emerged from the bond market. But without a crystal ball, it remains unclear when a recession might hit. Still, financial experts say people should consider taking certain steps that are beneficial in any economy but would aid households greatly in a downturn.

The longstanding advice remains — do not panic and stay the course on your financial plan.

It is sage advice, said Dan Keady, chief financial planning strategist at TIAA, but it also goes against the grain for many people. “It’s hard just to do nothing,” he said. “The best investment strategy is a long-term one. If you buy and sell your investments frequently, you’ll more likely than not buy and sell based on emotion — panic or excitement.”

If you simply cannot sit still, use this pressure as an impetus to check your plan. Are your goals the same? Are your investments allocated where you want them? It makes sense to periodically rebalance your portfolio to ensure your investments have not become too heavily weighted in one segment or another, particularly after a long stock market run-up like the one in recent years.

While it may be difficult, fight the urge to readjust your portfolio solely based on market conditions. People who sold during the last recession, for example, likely suffered a loss and then either missed out on major stock market gains in subsequent years or had to pay the price to jump back in.

If you originally designed your portfolio to match your long-term investment goals and risk tolerance, stay true to it, Keady said. If you don’t think you can be objective, ask a professional for help.