Here’s How America’s Millionaires Are Positioning For This Recession⁠—If You’re Doing Anything Else You May Want To Think Twice


Here’s How America’s Millionaires Are Positioning For This Recession⁠—If You’re Doing Anything Else You May Want To Think Twice

As the US economy grinds to a halt, there is increasing talk of a recession. In fact, US GDP has contracted for two consecutive quarters, amounting to a technical recession

But it’s not just average Americans who are concerned about what that could mean for their finances. Even those with at least seven figures in their bank account are concerned, according to TBEN’s Millionaire Survey.

The surveyed group — millionaires own about 90% of individually held stocks in the US — said they view inflation as the biggest risk to both the economy and their personal wealth.

So what are they doing about it? Here’s how some of the nation’s wealthiest individuals are preparing for a potential recession this year and how you can use the same strategies to weather tough times.

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1. Mostly nothing – for now

Sometimes nothing is the hardest thing to do. But when the market bottoms, reflexive reactions, such as selling investments immediately, are often the worst thing you can do.

Instead, wait for the market to strike its own balance before rebalancing your portfolio.

As Robert Frank, TBEN’s wealth editor, noted in a segment on “The Exchange,” that’s exactly what the millionaires are choosing.

“In March 2020, they were the first to see opportunities to buy … we see no signs in this study that they are seeing that opportunity to buy now – at least not yet,” said Frank.

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2. Mix it if necessary

While most people have to stick with it for a while, some investors — especially those with a strong focus on growth stocks — may want to consider changing their asset mix.

Nearly 40% of millionaires surveyed told TBEN that they plan to change their portfolios or have already made changes due to inflation. About a third say they have dumped stocks due to the effects of inflation on certain sectors and stocks.

Where do they invest instead? A whopping 41% are adding more fixed income investments, such as government and corporate bonds, which traditionally have lower risk.

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3. Keep money on hand

As we said, you don’t really want to sell when the market is shrinking. Taking money out of your wallet for an emergency or for retirement funds will lock those losses.

If possible, set aside more cash – as 44% of millionaires say they do these days. Homeowners can lean on the equity in their homes through a home equity line of credit (HELOC), but keep in mind that rising interest rates mean that these variable-rate loans are costing borrowers more these days.

For most people, the best option is a high-interest savings account, where your money can come in handy, but will also continue to grow on its own. Retirees should also lean on Roth IRAs if they have no other choices, as withdrawals are not taxed.

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This article provides information only and should not be construed as advice. It comes without any kind of warranty.