How To Prepare Your Investment Portfolio For The Upcoming Recession?

Months of stock market volatility, skyrocketing inflation, and rising interest rates have many investors wondering whether a recession is on the way. Many people's portfolios cannot withstand a recession or other economic crises. How can you, as an investor, mitigate or prevent the harm, avoid being wiped out, and maybe even come out ahead? Real estate.

Share on facebook
Share on twitter
Share on linkedin
Investment Portfolio For The Upcoming Recession

Don’t put all of your money into one investing instrument. Diversification of your strategy is one of the investment advice. However, some people neglect it during a downturn. One of the most common errors individuals make is believing they are diversified because they hold five different S&P 500 ETFs. They have a Fidelity account, a Schwab account, and a 401(k), all of which contain an S&P 500 fund. And they believe that because their custodian is different, they are investing in various things, but when the S&P 500 falls, the whole of their portfolios fall.

The Possibility of a Coming Recession

A recession is almost certainly on the way. It is just the way the world, economy, and finances operate. It’s not a question of if but of when.

Based on historical cycles and trends, the market typically flips every seven to fourteen years. Of course, this may change and gets impacted by other crises, monetary policy, stimulus, and market manipulation. Unfortunately, many investors have no strategy, even if an economic shift might be beneficial if you are in a position to gain from it.

Stagflation vs. Recession

When there is widespread inflation, the Fed responds by hiking interest rates. Several significant rises will chill the economy; nevertheless, to stamp out inflation, they would increase rates to match inflation. Historically, rates have risen from 14 percent to 20 percent.

When the economy slows but inflation continues, we might enter a time of dreaded stagflation, which means that if you don’t lose money in the stock market, you’re losing money if you don’t make the appropriate investments. Every day, the purchasing power of your savings, investments, and retirement accounts decreases.

If your money depreciates by 30% yearly owing to inflation, your $1 million nest fund is now worth just $700,000 this year. It will be $490,000 next year.

We must all get armed for times like this. We always need downside protection and inflation-protected assets. Put out a fairly big bucket if it starts raining gold out there. Unfortunately, most people aren’t paying attention to the holes forming in that bucket and how quickly it might flow away when the economy swings against them.

The imminent risk is that majority of investors are not sufficiently diversified. Many people think this because they have invested in stocks or funds on the recommendation of their broker or 401(k) plan administrator. Unfortunately, this isn’t true diversity.

It is critical to monitor the relationship between the performance of your various assets. While there may be a few exceptions, when the stock market crashes, very much everything crashes. It overcorrects not just for rectification, but also due to panic purchasing. Thus, most people awoke in 2008 to find they lost $70,000 or more overnight.

Stocks are highly correlated. Some people will always believe that investing in them is a good option. The argument is that you require a wider portfolio of assets in your portfolio. It makes no difference whether you own 10 publicly listed stocks or 110.

So, where should you put your money? Real estate investment.

So, How is Real estate a Good Recession Investment?

A recession gets distinguished from a contracting economy. People are spending less money on non-essentials and more on necessities. Companies may postpone recruiting or laying off staff to improve their bottom lines. Stock prices may fall as a result of economic uncertainty. Real estate is undoubtedly the finest asset to deal in during a recession. However, according to CBRE’s 2021 U.S. Real Estate Market Outlook, commercial real estate has done better than others throughout this crisis.

While the scenario isn’t exactly sunny, real estate may provide some security for investors when the economy slows. If you’re searching for an alternative to the market during a recession, these elements might make real estate a viable buy:

  • Weak correlation to stocks: Real estate has historically had a weak correlation to the financial market. Even if equities experience more volatility due to a recession, there is little spillover to the real estate market.
  • People still require housing: Even though the economy is in a slump, people need a place to live. If demand for rental properties remains stable or even climbs during a recession, and there is a limited quantity of homes available, property investors are best placed to depend on a consistent source of rental revenue.
  • Recessions provide bargains: A reduction in housing values does not always precede a recession. However, if a recession enables a hot property market to drop, investors may be able to acquire rental houses at a bargain.
  • Real estate can also be used as a hedge against inflation if a recession progresses to stagflation. High inflation and high unemployment characterize stagflation. Real estate prices tend to rise in lockstep with growing consumer prices. Thus, making it a more inflation-resistant investment.

How to Invest in Commercial Real Estate During a Recession?

Investing in commercial spaces is expensive and necessitates having or investing crores, don’t they? The shortage of crores, however, does not stop you from investing in financial structures. You can go ahead with just lakhs too. With fractional ownership, anything is conceivable. An individual can engage in commercial property fractional ownership through Assetmonk for Rs. 10 lacs.

Fractional ownership is an investment technique in which a group of people or corporations each own a section of a property, splitting the expenses of care and acquisitions plus the return. Rather than buying a complete building and putting up all of the money, fractional ownership investing allows investors to purchase a proportional share of assets. Fractional ownership provides a low barrier to entry for new investors with minimal market understanding. A fractional ownership investor should begin investing in luxury properties in large cities without spending too much money.

How Can Fractional Ownership Be A Recession-Proof Investment For You?

  • Resilience: Because of portfolio diversification, ease of departure, capital gain, and constant rental income, small investors are now fractional investors of commercial properties. Also, India’s commercial real estate market will expand from 13 to 16 percent soon, making fractional ownership of office buildings a beneficial investment. As a result, India’s commercial real estate market fell somewhat in 2020. Nonetheless, it improved in Q3. Covid-19 has depressed worldwide property values, particularly in Stockholm, Dubai, and London. According to industry insiders, office leasing increased during the same period due to India’s thriving outsourcing economy. Approximately 63 percent of office space in India gets used by MNCs from Europe and the United States. It should signify to investors that the time is ripe to own a piece of the real estate pie.
  • Diversification: Do you wish to diversify your property assets but lack the funds to purchase homes in various markets? It is attainable through real estate fractional ownership. For example, shared ownership gives investors in a property while both working in commercial office buildings and renting out your home and earning mortgage payments. Because your money is not connected to a specific property, you may distribute it among several properties, grades, locations, and regions within the same city. You can then opt to specialize in a certain sector or to continue diversifying and profiting from economic ups and downs. It reduces the likelihood of market volatility. Fractional investing enables you to reap the benefits of diversification without putting down substantial deposits on each property.
  • Ease of access: One can have access to and put his money in Chennai’s INR 400 crore commercial building through fractional ownership. Furthermore, it is a large commitment that is frequently only attainable to the wealthy. Nevertheless, because of fractional ownership, somebody in Chennai may purchase a comparable property for as little as INR 10 lacs. Such office property can also provide annual rental yields of 6 percent to 10 percent. It earns between INR 60,000 and INR 1 lakh in rental revenue every year. With Assetmonk, a person may invest in commercial real estate for Rs. 25 lacs.
  • Long-term lease: Rental unit tenants change out regularly. As a result, the landowner must cover the rent until a replacement is found. Meanwhile, commercial buildings have lease durations of three years or more. The lease contract can also be extended. As a result, commercial buildings give investors guaranteed revenue. Large enterprises, information technology organizations, and financial institutions rent such premium commercial properties. These companies pay their rent regularly. Also, considering the effort, time, and capital allocated to transforming the premises into offices, several tenants have extended their lease terms. Investing in an already rented office building, on the other hand, for huge returns.
  • Rental Revenue Returns: Rental money is regularly deposited straight into a bank. You need to wait for the investments to mature before getting your rewards. Due to continued rental revenue and appreciation, fractional ownership of commercial real estate gives a high return on investment. India’s commercial real estate investment has increased at a 16 percent CAGR in the last 5 years. Besides increased value, investing through a reputable fractional ownership firm might yield a 15 percent increase in rental revenue returns within the next three years. It is incorporated in the leasing contract to hedge from rising inflation, guaranteeing that your investments remain steady.
  • Real estate Appreciation: Investing in commercial real estate produces a two-fold return. Fractional ownership gives immediate income benefits as well as the commercial property value. You have a stake in commercial real estate. As a result, the value of your investment will rise. Small investors are becoming more financially enticed.
  • Liquidity: “Yet, real estate lack liquidity,” you add, “so I’d just invest.” We agree. Real estate has a liquidity issue. But, fractional ownership does not lack liquidity. All conventional property investments possess lesser liquidity compared to fractional property assets. Of course, you’d need to double-check your agreement. However, being able to sell your stake at any time makes trading less dangerous. How so? You may always sell your portion of the property and gift it to others.

Few investors can accurately “time” the market. Finally, investors must stay focused on their long-term investing strategy. Those who begin investing earlier will have a long-term view in which the market will fluctuate.

Investing in excellent real estate in strong markets through professional real estate platforms such as Assetmonk will be best positioned to weather the inevitable economic ups and downs. As previously said, fractions ownership is one strategy to prepare for a recession to help weather any economic storms that may come your way.

Related Articles

istockphoto 1312767508 612x612 1

What is National Securities Depository Limited (NSDL)

NSDL or National Securities Depository Limited is a financial institution that was established to keep securities like shares, bonds, etc in the shape of non-physical or physical certifications, that is in demat format. The securities are maintained in deposit accounts, which are similar to funds in bank accounts. It allows for quick securities transfer because ownership gets transferred merely by ledger entries. This is frequently done digitally, saving the extra time required in the previous practice of exchanging physical certificates once a deal was concluded. India’s capital market, which has been around for almost a century, has always been quite active. But, due to settlements that are based on paper, it had significant flaws such as poor delivery, prolonged transference execution, and so on.  To address these concerns, the Depositories Act 1996 was enacted and went into effect on Sept 20, 1995. This legislation mandated the Security Depositories establishment in India to manage securities.  Security is a financial asset that…

Read more
istockphoto 1176996544 612x612 1

Step-by-Step Process for Income Tax Login

Income Tax Login step-by-step process? To finish the E-filing of IT Returns, you must first successfully finish the registration procedure and connect to the IT E-filing site. You may utilize the e-filing site and a variety of services related to tax by finishing the income tax login process. The steps below will walk you through the process of finishing the income tax E-filing site login. Also, read Tax Saving via Deductions Under Section 80C 80CCC 80CCD and 80D. How To Do Income Tax Login? Step 1: Navigate to the Income Tax e-filing website. Select the “Login Here” option in the upper right-hand side of the site.   Step 2: After clicking the “Login Here” option, you will be sent to the Income Tax Login webpage.   Step 3: Also on the login screen, enter your User ID, which is your Permanent Account Number or PAN. Enter the password you created when you registered for your IT e-filing account. After you’ve…

Read more
istockphoto 1252264724 612x612 1

Everything about CSC Digital Seva Portal

CSC Digital Seva Portal is a gateway that provides info on numerous firms and electronic governance to inhabitants in remote and rural areas of India. A CSC facility’s full name is Jan Seva Kendra or Common Service Center. Common Services Centers or CSC is a network based in India that aims to transform India into a digitalized country. CSC Scheme 2.0 got started in Aug 2015 for improving accessibility to digital and technological services for citizens in remote and rural areas of India. The CSC Digital Seva Portal’s Goals Connect 2.5 lacs of Gram Panchayats in India. Citizens of India should access trustworthy and up-to-date info. In villages, all basic services are given in a single place. Deliver low-cost, services that are of high quality to average people. Governmental welfare and social assistance programs are promoted. Develop new rural jobs and promote rural entrepreneurship. Registration for the CSC Digital Seva Portal To commence the registration process, one must comply with…

Read more

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

PMVVY is an Open-ended Deferred Pension Plan. The scheme offers guaranteed return of 8% per annum for 10 years. Minimum pension amount is Rs. 1,000/ month and maximum pension amount is Rs. 10,000/ month depending on purchase price. Returns will be paid on a monthly basis. On maturity, the entire pension wealth will be paid in lump sum and no annuity will be offered thereafter by the Pension Fund Regulatory and Development Authority (PFRDA). The first installment of 5% or 50% whichever is lower is payable within 2 years from the time when account balance reaches Rs 1lakh/- which will happen after completion of 10th year under this scheme i.e before 2040s for most of us today! PMVVY is an Open-ended Deferred Pension Plan PMVVY is an open-ended deferred pension plan that provides guaranteed return of 8% per annum for 10 years. The scheme offers minimum pension amount of Rs. 1,000/ month and maximum pension amount of Rs. 10,000/ month…

Read more
EPFO KYC update for UAN

How to update KYC for EPF UAN?

KYC is being adopted by most of the government and private sector organizations for maintaining the proper records of official matters. The Indian government has already made it mandatory for employees as well as consumers to link their Aadhar card with various types of accounts and digital entities. Therefore, it is also compulsory for you to link your EPF with your Aadhar as well as other important digital documents. Don’t know how to do it? Don’t worry, we have got your back! In this article, we’ll learn how to update KYC for the EPF’s UAN and also go through the basics. Stay tuned until the end to understand it better.  What are the advantages of updating your EPF’s KYC details? A wide range of benefits can be reaped by updating the KYC on your EPF account. Some of those benefits are: You can make online withdrawal claims, which happen only after you link/seed your Aadhar with the UAN The transfer…

Read more
istockphoto 1353920585 612x612 1

EPF Form 10C – Benefits, Eligibility & Documents

EPF Form 10C is used to request a reimbursement of the employer share, the withdrawal benefit, and the scheme certificate for membership retention. An Employees’ pension fund (EPF) or Employers’ Pension Scheme is a retirement plan that EPFO enfranchises for employees working in organized sectors. Both the employer and employee contribute to EPF during a person’s employment period at that company. UAN – This unique number is assigned to each member of EPFO. It consists of 12 digits. An EPF certificate gives information about the employee’s employment, including the service period and the family members that will be able to benefit from the scheme in the event of death. Individuals can choose to continue their work after they retire from a company. You can either transfer the company to your next one or withdraw it. In case of withdrawal, the person must file EPF Form 10C.  Filling EPF Form 10C   Online and offline filings of Form 10C are possible. These…

Read more