With Coronavirus spread, global markets are gripped with fear. We see 15% plus correction across markets and you would see the same reflected with a drop in your equity mutual fund value or stock portfolio value. The situation may get worse and we could see a further decline or a recession. Stop binge-watching the news, social media and take action. Here are 3 ways to survive a recession and thrive in the long run.

Step 1 – Secure your one year of expenses.

If you have a monthly budget awesome. If not, this is the time to build it. It will provide you an idea of how much is your monthly expense. Say your monthly budget is 1 lac Rs, then you should have at least 12 months of expenses in fixed instruments such as FD or debt funds. I prefer about 50% in FD and 50% in debt funds. Remember, this is your emergency expense and not investment. Keep it in a separate bank account or brokerage account. Do not touch it until you face an emergency such as job loss, medical needs. Keeping one year of expenses aside will provide you peace of mind irrespective of economic boom or bust. Below is the sample budget. Download this sample excel to build your own.

Step 2 – List out items or services that you would forego.

An economic slowdown or recession leads to layoffs from jobs. Companies try to reduce expenses to survive the recession and may choose to let employees go. It has happened to my closest friend and my colleague sitting next to me in 2008. While we hope it would not happen, it is a good idea to be prepared. Once you have built the budget, you can decide what expense you can live without. Discuss with family and prepare this list upfront so that you keep calm and find a way out of the challenging situation. The goal of this step is to survive the recession and play another day. After reading multiple books, I learned that when forced, people will usually stick with housing, food, clothing, medical and education expenses and let rest forego.

Step 3 – Re-balance your portfolio to thrive

With 15% plus fall in the stock market, your portfolio is likely to have a higher percentage allocated to debt instruments vs. equity. For example, Let’s say that you are a financially savvy person and have kept 15 lacs aside for investment after covering for basic needs. You are a moderate risk investor. In January 2020, you split these 15 lacs and invested 5 lacs in gold, 5 lacs in fixed instruments such as FD or debt fund and remaining 5 lacs in equity such as stocks or equity mutual funds. Therefore, your allocation to each asset class is 30%. With a 20% fall in equity and a 15% jump in the gold price, this is how your asset allocation looks now.

You may want to use bear market opportunity to move part of funds from Gold or fixed instruments to equity and sit tight. Alternatively, you can use the extra cash on hand to invest heavily in equity now. In 5-6 years, as markets will improve, you would have made handsome gains by buying stocks at attractive valuations or more mutual fund units at a lower price. I do this once every quarter after understanding the importance of Tony Robbin’s book Money: Master the Game. Remember, you do this to keep your asset allocation balanced per your risk appetite, in the above example balance everything to 33%. Below are numbers to explain further.


To conclude, the primary focus is to have enough funds in the bank to cover your one year of basic expenses, prepare the list of expenses that you would forego in case of an unfortunate situation like job loss. Once you know you can survive the recession, the next step is to thrive post-recession which needs money in the portfolio and its rebalancing.

With the interconnected global economy, we are likely to see more booms and busts that impact us and being prepared will help us not only survive but thrive and achieve financial freedom.