Cyclical companies - think luxury goods and services such as travel and entertainment - which closely follow the ebbs and flows of the macroeconomic backdrop, typically fare poorly during downturns. “Diversifying your portfolio is a common strategy in all market conditions, but in times of economic stress, it may be necessary to allocate a larger portion of your portfolio to less risky investments.” luxury goods and services such as travel and entertainment - which closely follow the ebbs and flows of the macroeconomic backdrop, typically fare poorly during downturns. People tend to cut back on these products and services during financial challenges as they aren’t ‘necessary’. While in contrast, ‘defensive’ companies - selling essential goods like groceries, utilities, and healthcare - weather tough market conditions better, as consumers have to keep buying them no matter what. Diversifying your portfolio is a common strategy in all market conditions, but in times of economic stress, it may be necessary to allocate a larger portion of your portfolio to less risky investments. This could include investing in high-quality bonds, commodities like gold, and essential goods like toilet paper. While - in some cases- these assets may have lower returns, they offer less risk. The temptation to cash out During sudden market downturns, the temptation to sell investments can be strong. However, selling assets in times of uncertainty Investment 62 Finance Monthly.
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