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How To Prepare For A Market Downturn

By Tom Breiter, Integra Capital Advisors

It’s coming. At least that’s what we keep hearing about the next recession. And even though 2019 has helped us all breathe a collective sigh of relief after the market chaos at the end of 2018, our current record-breaking bull market won’t last forever. We’ve been through downturns before, and we’ll go through them again. The important question is: Will you be ready? Here are a few things to keep in mind that will help you prepare for the next market downturn, whenever it comes.

Spread Out Your Investments

In the 1990s, investors placed their money heavily into the early e-commerce sites, and when that bubble burst, it birthed what is now famously known as “The Dotcom Crash.”  (1)When people were losing faith in the stock market, they looked at real estate as well as their own homes as the place to focus their sights (and money) on. However, the constant speculation and unsustainable rise in home values eventually led to the Housing Market Crash of 2008, (2) and eventually bled into the Great Recession. If history teaches us anything, you never want to put all of your eggs in one basket as it’s never a guarantee that the basket will never fall. 

Instead, diversify your portfolio with a combination of different investment sources. Modify your portfolio to include stocks of varying risk levels (safe, moderate, and high risk) and spread your money out between stocks, bonds, funds, and investments in different sectors. In this way, you can minimize the impact that any one losing investment can have on your overall portfolio performance. 

Diversify Your Income

Economic downturns often go hand in hand with job instability. So, in addition to diversifying your investments, consider diversifying your income sources as well. Besides your salary, consider where other sources of income can and will be coming from. This might mean investing in rental real estate or other income-producing investments such as higher-yielding stocks and bonds, picking up a side job, starting your own small business, or making money online. The more diversified your income, the safer you’ll be.

Create An Emergency Fund

This strategy is all about preserving the wealth you’ve accumulated to this point. While cash investments may not provide a lot of growth, having a cash contingency fund with at least six months of living expenses will protect you against having to sell investments at low values to free up cash. Examine spending patterns and find ways to tuck away even more into cash or cash equivalents, such as short-term bonds, certificates of deposits, or Treasury bills.

Stop Trying To Predict When The Next One Is Coming

The only long-term guarantee in investing is that there will be short-term fluctuations. We’ll experience bear and bull markets in the decades ahead just as we have in the past decades. Rather than fear change, focus on preparing for it. 

Are you ready to see all your options for protecting your money? We work primarily with clients who desire our personal yet structured process for planning and investing that relieves them of the day-to-day worry of the financial markets with freedom to pursue what they value most and allows them to feel confident and reassured. We call this process the “Waypoint Formula.”

Call us today at 941-778-1900 or email info@integracapitaladvisors.com to plan your path to financial freedom.


(1) https://www.investopedia.com/features/crashes/crashes8.asp

(2) https://www.investopedia.com/features/crashes/crashes9.asp