The past year hasn’t been easy for many people. Stock prices have plunged, and many older adults have watched their retirement savings dwindle. Inflation has also wreaked havoc on many Americans’ finances, making it harder to pay the bills.
On top of that, many experts believe a recession could be coming in 2023. Whether that will actually happen is unclear right now, but if you’re on the verge of retirement, even the hint of a recession can be unnerving.
While you may not be able to prevent a potential recession, there is one step you can take to help protect your savings: Double-check your asset allocation.
What is asset allocation?
Asset allocation refers to how your investments are divided up within your portfolio. It aims to balance risk and reward by offsetting some of the riskier assets in your portfolio with somewhat safer options.
The two major types of assets in most investors’ portfolios are stocks and bonds. Stocks generally see higher returns over time than bonds, but they also carry more risk — and they tend to experience more significant ups and downs during periods of volatility.