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What should I do with my money if there’s a recession?

Ingrid Macintosh, VP, Wealth, TD Asset Management

As concerns about a recession due to COVID-19 continue to spread, many people are pulling their investments out of the market while planning to jump back in again when they feel conditions are right.

But regardless of whether there’s a recession on the horizon, dwelling on dire economic news distracts us from focusing on the steady, long-term outlook which can ultimately make an investment plan successful.

What to do if a recession happens?

A recession is a natural part of how an economy works - and after every recession so far there has been an economic expansion that has more than made up for the previous declines. Want proof? From 1962 to this year, Canada has survived four recessions — officially judged as two consecutive quarters of negative economic growth — and every single time the economy has come back with strong growth. Market dips can be a great opportunity to get your investment strategy in check.

Here's what you should keep in mind.

The long-haul matters

Investing isn't a game we can decide to play one day and watch from the stands the next. Studies show that if you miss the four best positive days in the market every year, it can dramatically weaken your portfolio. Always being invested means you can benefit from the power of compound growth over decades. If your goal is saving for a comfortable retirement, you don’t want to miss any chances for great returns. Investing can be a life-long pursuit, but you can’t win when you stay on the sidelines.

Think about your investments this way: a traffic delay can ruin your morning, but if you pull over, you’ll never reach your destination. In the same way, market downturns can become meaningless in the course of a lifetime of investing, provided you stay on the journey.

Think carefully about GICs

Even if you’ve moved the bulk of your investments into GICs, with inflation at about 2% and most GICs now earning less, that decision will actually give you a negative return after inflation. GICs have their place but they don’t have a major role in a long-term growth portfolio.

Keep government and central bank efforts in mind

Governments and central banks around the world are working to provide stimulus to the economy. An unexpected market setback can be scary. The reality is that the government and central banks are working to alleviate any stresses during these turbulent times. This is great for investors.

Stay confident

Don’t let your emotions get the best of you. If you’re worried that a recession or any other negative news might harm your investments during the COVID-19 pandemic, don't panic. And if you have gotten spooked and are waiting for the best time to get back in, consider that it might be now — there are only so many growth periods in a lifetime.

How to contact us

Your health and well-being are what matter most. As we keep a close watch on emerging cases and affected regions, we're committed to keeping you posted on what we're doing and how you can continue to bank.

If you're a TD Customer and you've been affected by COVID-19, we may be able to help. Learn more about our assistance programs and the community support we're providing to address needs resulting from the spread of COVID-19.

DISCLAIMER: This content discusses current topics of interest in a general and informational manner only and may not be appropriate in all circumstances. Please ensure that you seek advice personalized for your situation from the appropriate professional, consultant or subject matter expert on the topic of interest to you.

Brought to you by MoneyTalk

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