Inflation or Recession?

You may have heard recent debates lately as to whether we are headed into recession or major inflation. There are good arguments for both, but let's face it, no one can predict with any certainty which it will be. So your best bet is to be prepared for both. Here are some things you can do.

-Lighten up or avoid junk bonds (they will get crushed in a recession)
-Lighten up or avoid long term bonds (their value will get eaten away by inflation)
-Buy short or intermediate term bonds
-Allocate a portion of your portfolio to foreign bonds
-Allocate a portion to TIPS (Treasury Inflation Protected Securities)
-You should put no more than 10% of portfolio into REITS
-Put no more than 10% into commodities or natural resources.

Balance your stocks between those sectors that do well in inflation and those that do well in a recession. Sectors that do well in inflationary periods are energy, food industry and dominant technology. Sectors that do well in recessionary periods are consumer staples and utilities. You are usually better off if you invest in larger name stocks. If you are a fund investor, try large-cap growth (for inflationary periods) and dividend focused value funds (for recessionary periods).