What tactical changes should you make to your portfolio in response to the prospect of a recession? None. No one can consistently predict the economy, nor can anyone consistently time the markets. Therefore, the only way to be sure of capturing all of equities’ permanent return is to ride out all of equities’ temporary volatility.
Thanks to the virtues of equity index funds, which are broadly diversified, low-cost and tax-efficient, it only takes two funds to form a complete equity portfolio. Compounding over the long term takes care of the rest. That’s radical simplicity.
When we’re constantly inundated with breaking news and catchy headlines, it’s difficult to consider life beyond the daily news cycle. But a short-term mindset can destroy an investment portfolio. Paying attention to short-term market changes leads investors to imagine the worst possible outcomes and make terrible decisions.
