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investment portfolio

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No one knows exactly when the next recession will hit. It could be five years from now, five months from now, or it could take shape as a result of the recent coronavirus scare. One thing’s for sure, though. A financial downturn will happen eventually and another recession is on the way. Unlike previous recessions, though, many current professionals operate as freelancers. Working as a freelancer provides a number of advantages, but it can also be quite challenging in some ways as well. Here, we’ll explain everything that freelancers need to know to manage their finances during a recession:

Start Saving Now

It’s never too early –– or too late –– to start saving up for the future. While “traditional” nine-to-five employees may benefit from employer-supported 401ks and health insurance, freelancers have no such safety net. That’s why it’s crucial to build up a substantial savings fund now. Living paycheck-to-paycheck might work out if you can rely on a steady stream of income. But if a recession affects your ability to generate personal revenue, then it’s imperative to have enough capital saved up to cover essential expenses.

Lean on Relationships

The best freelancers don’t wait around to find work. During a recession, it’s unlikely that many companies will actively search for extra support. And jobs that do get posted on sites like Upwork will probably go quickly. As such, it’s a smart play for freelancers to develop positive working relationships with business leaders in their field. This will allow them to check in and get the inside track on projects or assignments during lean periods. In business, who you know matters almost as much as what you know.  

Expand Your Skill Set

Working in a niche field can be a solid way to start your career as a freelancer. However, if you want to improve your viability, you’ll have to expand your skill set so that you can take on new jobs as they hit the market. This could include almost anything –– from learning about the RFP process to enhancing your writing abilities. Don’t hesitate to learn new things because they could come in handy one day!

Talk to an Expert

Unless you’ve spent years studying economics, you may not understand everything there is to know about managing resources during a recession. Indeed, it is possible to not only survive a recession, but to thrive under such conditions. You just have to have a plan in place and know how to execute it. It makes a lot of sense for freelancers to enlist the help of a financial planner. They can create contingency strategies and explain how to create an effective investment portfolio regardless of the state of the market.

Bottom line: don’t be afraid to reach out for help if you need it!

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You might think that risk-rated funds are the only solution for the core hold of your portfolio. After all, it is what you would normally hear from others. But, in reality, the secret to ensuring their assets match the ones you aim for is to supplement them with so-called “satellite” funds and shares.

Fortunately, it is not too late to turn things around. Here are some tips on how to customize your portfolio to suit your goals. Be sure to keep them in mind from now on!

#1. Cheap Is Not Necessarily Cheerful

Believe it or not, many tend to focus more on fund charges, which seem to be the trend since time immemorial. But what you may not know is that most, if not all, are not necessary. Some might have a charge for the platform or advice, especially if you are taking it. More importantly, there is always a charge for the investment funds.

Remember that a cheap fund does not necessarily mean it fits your purpose. The same thing can be said for an expensive fund – it does not convey superiority. Your best course of action is to look out for performance-related charges, as well as those platform costs (i.e. when trying to move money around).

#2. Always Identify Your Goals

It holds true that your appetite for risk is – and always will be – a significant consideration. But do not forget that there are other contributing factors involved. This is the point where you need to ask yourself: “What are my investment goals?” Do you require a short- or long-term objective? Or perhaps you are in need of a certain amount just to guarantee an annual growth for your investment goal in the stock market?

These questions, while all may not necessarily apply to your current situation, can help you gain concrete knowledge about your stand. Even more so, it will help you realize the fact that there is more importance emphasis when it comes to risk analysis. The latter, in particular, conveys the message that your fund may either underperform or take too much risk.

#3. Keep Everything in One Place

Do you know what a balanced portfolio should be? Well, it is the type that holds bonds, cash, and even shares. As soon as you achieve a solid core portfolio, expect a great number of adventurous investors to add riskier holdings in order to diversify. You may find it difficult to acquire this type of ideas, but as long as you are willing to think outside the box, you will be introduced to more tantalizing investments.

Being a professional means utilizing a wide range of left-of-field investments – a crucial element in achieving diversification. This includes, but not limited to, private equity, currencies, commodities, and student housing.

#4. Remember To Consider All Assets

A lot of investors these days tend to consider their investment portfolio as something that is merely their shares and/or composite funds. Unfortunately, this is a worn-down idea that needs an overhaul. Why exactly? That is because there are other factors involved, and they may refer to cash accounts and properties. All of them, regardless of size and shape, are to be accounted as assets as well.

Let’s say you own multiple properties. This is where you want to be extremely wary of purchasing a fund, particularly the type that comes with property exposure. Likewise, if you hold a lot of cash, it is imperative that you find a liquid fund which is totally invested. Otherwise, there is a possibility that you will be hit by extremely low-interest rates.

#5. Regularly Review Your Holdings

This is definitely a no-brainer. It is even something that you should always consider. Keep in mind that risk-rated funds – no matter how you perceive them – are a one-stop-shop for life. Your goals will have the potential to change as time passes by. As such, you must ensure to review all of them as you would with investments. A general rule of thumb is to look at your portfolio at least once a year, though doing it twice has become a more acceptable narrative.

Sure, you may not find the need to purchase or sell funds, say, as often as twice or thrice a year. But, in one way or another, you will chance upon certain life stages that will force you to consider tweaking your portfolio. It could be about purchasing a property or simply becoming a parent.