We may or may not be headed into a recession. It depends upon which economist you believe, but it is time to assess your risk exposure and possibly reallocate your portfolio holdings. Don't panic and start selling just because you hear warnings of a recession. You may be locking in loses that are not necessary, especially if the assets in your portfolio are being held for the long-term and you won't need them for ten years or more years.

Step 1 - Take Stock of Your Stock/Mutual Fund/Bond Holdings: Review your holdings and ask yourself these questions: Did your holdings perform the way you expected them to do when you first bought them? Did they do better? Did they do worse? Do you think they are still a good choice based on your investment horizon? Is your allocation out of whack? For example, did you buy some aggressive growth stocks or mutual funds that are now a much larger portion of your portfolio than you think wise.

Step 2 - Sell any stocks or mutual funds you determine don't match your current goals: As you look through your portfolio and find holdings you really don't want any more, bite the bullet, take the loss (if there is one) and don't risk an even greater loss if we do end up in a full-blown recession. Hold on to any cash generated for buying opportunities once the current stock market correction has finished doing its damage.

Although some people have the knowledge, resources and savvy needed to successfully play the stock market for themselves, many other people don't. For the people who lack the time or talent to manage their own portfolios, there are funds that will handle the technical work for you. In oversimplified terms, you simply place your money into your fund account and let them grow it for you.

I found an article at Investopedia which is the best short course about funds that I have ever run across. By understanding the elements that define a particular fund, better choices can be made about how to structure your fund program to accomplish your goals. The article discusses life cycle funds, fund allocations, risk assessment, investing style and fund management. You'll also find guidance about fund fees, diversity and personal investment goals.

Based on what I have learned over time about investment funds, my personal fund portfolio is structured for diversity, conservative protection, and both long and short term growth. I have 20% of my fund assets allocated to global investments, 20% in real estate securities, 20% in small cap venture funds and the remaining 40% is in fixed income holdings. Because of my asset allocation structure I may have missed out on some big gains here or there, but overall I'm pleased with my performance. My fund portfolio shows about 23% total growth over the last three years and my portfolio structure has proven to be modestly bullet proof, yielding a loss of only 0.73% through the recent credit industry foibles.

Even if you don't plan on investing in a fund for yourself, if you have a retirement plan at work, those assets are probably in investment funds and you probably have some control over the allocation of your assets. It pays to have an understanding about how funds work and how your goals affect the way you might tune your own retirement account. The article at Investopedia can be a helpful tool and it does a great job of making investment funds easy to understand.