Kavan Choksi on Investing During an Economic Slump

Kavan Choksi: Protecting Your Portfolio During Recession

As the economic climate shifts, it's becoming clear that we may already be facing a recession - a prospect that can send shivers down the spine of even the most seasoned investors. In light of rising inflation, high-interest rates, and plummeting stock market values, it's natural to feel anxious about the state of your portfolio. However, there's no need to panic - you can now protect your investments and make strategic moves to capitalize on the current market conditions. Here are some practical and effective ways to maximize your investment opportunities during a recession.

Beef up Your Cash

Kavan Choksi believes that cash is king during a recession. Companies may cut costs and let go of employees, so it's better to beef up cash reserves. Cash can help investors survive economic uncertainties and buy stocks with low prices. However, Kavan Choksi does not recommend selling investments at a loss. If you're holding stocks of companies with solid fundamentals, there's a good chance you will be rewarded for your patience. The best strategy is to shift to S&P 500 ETFs, commodities, and bonds.

Buy Defensive Stocks

Defensive stocks are also called non-cyclical stocks. The gains and losses of defensive stocks do not depend on the rise and fall of economic cycles. Some examples of defensive stocks are utility and consumer stocks. Consumer companies tend to be insulated from market volatility because they sell essential goods and services, such as food and personal care products. Utility stocks that provide electricity are less exposed to the ups and downs of the economy.

Dollar-Cost Averaging

The dollar cost averaging (DCA) strategy aims to invest a fixed amount regularly without looking at the charts. According to Kavan Choksi, this investment strategy can be useful in bear and bull markets. For example, during a recession, the prices of stocks are often lower than their intrinsic value. So, you can dollar cost average regularly and reap the benefits of capital gains when the market goes back up.

Kavan Choksi is currently writing a series of blogs based on his knowledge of finance, business, and economics. Click here to read more articles and updates.