Investing During A Recession: Preparing Your Portfolio

The United States appears to be on a path to hit another recession, which means you should begin preparing your portfolio to weather that storm. Recessions may be quantified in a variety of ways, such as a decrease in GDP quarter over quarter or a rise in the unemployment rate. Recessions can affect different industries in different ways. The commercial real estate sector, for example, takes longer to feel the effects of an economic downturn. Because of its illiquid character (it cannot be acquired and sold as quickly as public instruments such as stocks and bonds), real estate takes longer to respond to economic turmoil. The consequence of falling yields may take months to become apparent. Similarly, these effects may last longer than those of other asset classes and groups.

During a recession, commercial real estate prices nearly usually fall to some extent. As a result, investors might anticipate more appealing purchasing opportunities during a recession (a bear market) than during a booming economy (a bull market).

Here are a few ideas to help you prepare your portfolio for the recession that is fast approaching.

Maximize in-place yields

We place a high value on in-place yields at GenX Capital Group. We look at rentals, positive free cash flow, the differential between interest rates and going-in cap rates, and other factors when analyzing prospects to evaluate how an asset will perform from day one. We invest in small private B2B firms with $1MM to $5MM in revenue and a healthy cash flow. Even during a recession, these sorts of assets tend to hold up well.

Consider Holding Periods

Many investors wonder if there is an “optimal” holding time to consider when putting up a recession-resistant portfolio. There is no perfect holding period. Rather, the holding time must be consistent with the overall business plan. Then, depending on where we are in the economic cycle, an investor must decide if that holding time possibly adds or lessens risk. Some investors prefer to lock up their money for a decade or more, whereas GenX Capital Group intends to treble investments in just four years. Our investing method has consistently produced outsized returns, with estimates indicating even bigger returns. In the end, it all boils down to portfolio balance and diversity.

Invest In Needs Based Businesses

Our strategy at GenX Capital Group has been to invest in “need-based” asset classes. These assets will continue to be in demand regardless of the stage of the economic cycle and will provide the groundwork for a strong pre-recession foundation.

Investors should have created robust pre-recession portfolios that included reliable investments that survived the storm effectively. During the recession, they will have undertaken smart investments, such as investing with quality sponsors in a narrower pool of purchasers and participating in transactions at a reduced basis due to stress conditions. Those who took these efforts prior to and throughout the recession will be well-positioned to increase portfolio growth after a recovery.

Our years of management & investment experience position us as leaders in this space.  When you are ready to hedge your portfolio against the recession, call GenX Capital to get started.

Contact Us Now for More Information

Or Call us at (312) 204-6100