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A financial planner who helped clients through the Great Recession has 5 tips for getting through the next crisis

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  • Financial planner Michael Garry opened his business in 2006 and helped clients through the Great Recession.
  • With a possible recession on the horizon, he advises sticking to your plan and investing more if you can.
  • He also says recessions can have a silver lining: cleaning up dysfunctional industries.

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The news is full of stories about high prices at the supermarket and the gas pump, and the “R” word (recession) is becoming more and more common. For those who lived through the Great Recession from 2007 to 2009, the prospect of another recession is disturbing.

Michael Garry founded Yardley Wealth Management in 2006, so he’s been here before. Insider spoke to him about what he learned during the Great Recession and how those lessons apply to today’s investment environment.

Lessons from the last recession

When thinking about the last recession or the current economic slowdown, Garry says, “The most important thing is to keep the long-term perspective that recessions and bear markets are both necessary and temporary.”

When he was rebalancing accounts and buying stocks in the late 2000s, some people thought he was crazy, but the strategy worked in the long run as stocks recovered.

“It’s very understandable that people are anxious right now,” says Garry, pointing out that “uncertainty breeds fear.”

He suggests that people focus on the big picture, which is that markets have historically recovered, and they likely will today. “Maybe things won’t get any better and we’ll start selling pencils on the street,” he says, but doubts it.

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Why recessions can ultimately be a good thing

Garry pointed out that one of the effects of the Great Recession was to strengthen the financial sector.

Bad ideas – business ventures that are not sustainable – are washed away during a recession. That is terrible news for those who work or invest in those sectors and lose their jobs or investments. However, the sweep generally makes the economy more robust.

“Banks are so much better off than they were” during the last recession, he says, noting that they are less in debt than they were in the 2000s. “They learn from mistakes and get better.”

5 tips to keep your portfolio healthy today

Garry shared these tips for investing during the current recession, whether it turns into a full-blown recession or not.

Stick to your plan

“If you have a plan, stick to your plan,” says Garry. “Don’t change that because of the recession.”

Don’t panic change your investment profile and don’t put your money under a mattress. People who stuck to their investing routines during the Great Recession did very well after it was over, as stocks made significant gains.

Do not bet on future performance in the industry

What is clear in hindsight is not easy to predict in advance. Garry recommends investing in asset classes such as large-cap or small-cap stocks, foreign investments, etc., rather than one sector. That hedges your bets by spreading your investments across many sectors rather than focusing on one area that could collapse.

If you can invest more, do it

If you can increase your investments now, “I would encourage it,” says Garry. “It’s like buying things on sale.”

Putting more into your investments now is the definition of buying low, so it’s a good idea. And when you retire in a few years, consider this a bonus and take advantage of falling stock prices.

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Avoid investments to get rich quick

Economic uncertainty can predispose us to investments that promise quick returns, but traditional investments remain your best bet.

“When things are a little uncertain,” says Garry, “it’s so much easier to believe that someone out there knows what you don’t know.”

It is probably no coincidence that the first cryptocurrency, bitcoin, was created at the end of the last recession and promised to create wealth out of thin air. Crypto doesn’t seem to be doing well at the moment. It could recover, or it could become one of the industries wiped out during this recession.

Be flexible with your retirement plans

If you’re already retired or about to retire and need to wind down your portfolio, a bear market is a real problem.

Garry says if you need 2% to 3% of your retirement savings to support yourself, a recession won’t affect you much. However, consider changing your retirement plans if you need to withdraw 4% or more.

For example, Garry suggests that if you were planning on retiring this year and taking an expensive trip, push that or something that requires a large outlay of money back a year or two. If you can postpone your retirement or offer some advice until the market recovers, “that could help your plan a lot,” he says.

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A caveat and a hopeful sign

One of the main risks of a recession is also the most difficult to anticipate: unemployment. Garry has worked with clients who were comfortable in their jobs, often on good incomes, who were unexpectedly laid off due to downsizing or acquisition. If that happens to someone in their 50s, it can be hard to find another job and even harder to get a job on the same level as your previous job.

A period of unemployment or underemployment near retirement age, or being forced into early retirement, can have a significant impact on retirement. So it’s a good idea to keep your resume up to date when the economy is volatile.

That’s the bad news, but Garry also had some good news. He noted that markets look forward, not backward, and the market data for the past 100 years shows that stocks begin to recover in the middle of a recession, not after it ends.

For example, if we had a recession all through 2023 and exited it in 2024, you could expect the market to start growing sometime between April and August 2023. Garry noted that we could already see that effect as October and August November were better months for the stock market, which could indicate we are halfway through the current downturn.

One final piece of advice: “It’s always a good time to talk to your advisor,” says Garry. If something changes in your situation, make sure your investment plan stays up to date.

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