8 Steps to Save Your Portfolio in a Market Downturn

The first time I read about how to handle yourself and keep your investment portfolio safe during a market downturn, I was fascinated. It made so much sense. 

The fifth time I read about it, I thought, “okay, yeah. I’m ready; bring it on.” The nineteenth time I read it, I wondered, “why does every book cover this? Who in the world doesn’t get this already? Should I go back to reading sci-fi?”

Then, after going through a couple of real-world market downturns myself, it started to click. But unfortunately, a LOT of people still don’t get it. Many, many people still burn themselves unnecessarily when conditions get choppy.

It isn’t always easy, even if you know what to do. Enough people acting crazy will make you feel like you’re the crazy one. Your rational understanding of what to do and the emotional turmoil of doing things differently from everyone around you come into conflict.

So for this market downturn, the next one, or the one after that, here’s everything you need to know to keep your investments safe and your mind sane.

8 Ways to Handle a Market Downturn

1. Do Nothing

Overall, the best thing you can do for your investment portfolio during a market downturn is… nothing. 

Markets go up, and markets go down. But despite short-term fluctuations, the economy is continuously growing in the long run, and so is the market. So when you’re investing for the long term, as we all should be, the fluctuations are inconsequential. All that matters is the arc over time.

When you react to a market downturn and sell an asset to “cut your losses,” you’re not protecting yourself. Instead, you’re taking a loss that was both imaginary and temporary, and then realizing it into something that actually hurts you.

You never lose money on an investment until you sell it at a loss. Your only job in letting it succeed is not to sell it at a loss. So when things dip, you have the most straightforward job in the world: just sit there.  

2. Enjoy a Nice Hot Beverage

Who doesn’t love a nice hot beverage? Mm-MM! Coffee, espresso, maybe a little hot chocolate if you’re feeling particularly saucy. A hot drink is a great way to relax, unwind, and settle in. I’m personally enjoying a lovely Irish breakfast tea as I write this. 

What, those red numbers on the screen? Don’t look at those; look at me. Hey. HEY! Eyes over here. There’s nothing for you to worry about over there. That’s just the market doing what it does. The only financial harm that can come to you right now is if you try to “fix it.”

Or, if you’re on a healthy kick, try matcha or a nice chai latte. And, of course, for the troublemakers among us, there’s always a hot toddy or an Irish coffee. Wink. 

3. Keep Buying (But at a Discount)

Let’s say you go to the grocery store and buy two pounds of ground beef for $4.99 a pound. Now imagine a week later, you go to the same store and see that ground beef is selling for only $3 a pound.

Would you immediately rush home to get rid of the ground beef you have before it loses you more money? Or would you spot a great deal and load your cart with cheap hamburger meat before the store notices their mistake?

The value of the meat didn’t change, only its price. And a gap between price and value is always an opportunity for building wealth. It works the same way for your investments.

You bought the assets you own at the price you purchased them. If the reasons you bought them (growth potential, future income, etc.) haven’t changed, then neither should your strategy. The only difference during a market downturn is that everything’s on sale!

4. Go for a Long Walk Outside

A walk outside is one of the best gifts you can give yourself. It’s a great way to break up your day, create some negative space to think, and it’s better physical exercise than most people realize.

Wait, why are you googling downside protection strategies? Stop looking up downside protection strategies! They don’t exist; more importantly, you don’t need them! Let the market do its thing, and you’ll be fine. Try to outsmart it, and you won’t.

If you can take a walk in nature, that’s even better! A growing body of research shows that spending time in nature is fantastic for mental health. Humans are from nature, after all. So it’s nice to go back and visit from time to time!

5. Find Ways to Increase Your Cashflow

We’ve established that, rather than panic-selling, market downturns are a terrific opportunity to buy even more. That’s why one of my favorite things to do during a down market is to look for any way I can throw more fuel on the fire!

As always, there are two ways to increase your monthly cash flow. You can increase what you’re bringing in, or decrease your spending. Here are a few fun ways you can challenge yourself and improve cashflow during a market downturn:

  • Start a new (or expand an existing) side hustle
  • Pick up some short-term gig work
  • Have a yard sale or sell stuff you don’t need anymore online
  • Look for one area of your budget that you could improve
  • Try a “challenge month” of super-strict spending in one area

Remember, this doesn’t necessarily have to be a sustainable life change. Wealth-building is a marathon, not a sprint, that’s true. But that doesn’t mean you can’t dig your heels in and push a little harder sometimes when there’s an opportunity. And a market downturn is a great opportunity.

6. Try a New Hobby

Starting a new hobby is a fun way to take your mind off things and dive into something just to enjoy it. Plus, hobbies can give you new knowledge and skills that can prove valuable later.

Oh, so you’re just going to sell off a few of your holdings to be on the safe side? Please, don’t do it, friend. Jumping off a 30-foot cliff is safer than jumping off a 75-foot cliff, but it’s still jumping off a cliff. The view’s better from the top, trust me.

Hobbies challenge your brain in ways that your regular routine usually doesn’t. This shake-up makes for excellent brain exercise. Many hobbies can even make you some side income down the road. Though, of course, they never need to.

7.  Look to What the Pros Are Doing

“The stock market is a device for transferring money from the impatient to the patient.”

Warren Buffett

Market downturns are typically a period where fantastic wealth is made by those who understand what’s happening. Look at what the wealthiest and most successful investors are doing during these times. You’ll notice that it’s not all that complicated.

A large-scale downturn is a period when impatient and emotional investors sell off significant chunks of their wealth at a loss. But every transaction has two parties, and there’s always someone on the other end buying at a discount.

Patient, long-term investors know that volatility is temporary, but an asset’s underlying value lasts and grows. 

8. Start a New Show on Your Favorite Streaming Service

I know that too much TV isn’t the healthiest thing for a happy life. But I also understand that a bit of TV brings me much enjoyment and helps me rest and recharge my brain. So it may be a great time to sink into your next great watch if you’ve got stuff stressing you out (like, say, a bunch of scary lines on a chart). 

I can’t believe we’ve been through this whole article together, and you’re still sneaking off to buy a bunch of commodities, bonds, and crypto to hedge your portfolio. You’re not Ponce de León; a big pile of gold won’t save you. Just stay the course.

We’re living through one of the great golden ages of television. So if you can’t find anything good to watch, here’s a little trick to try: Cancel one streaming service you currently subscribe to and subscribe to a new one for a few months. There are like a thousand of them now, and each has at least a couple of gems to offer.

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Hey, I’m Sam. I created Smarter and Harder to explore big ideas, both old and new, about building a better life. My mission is to evolve the conversation about personal growth and have fun doing it.

2 thoughts on “8 Steps to Save Your Portfolio in a Market Downturn”

  1. Great read! I am not a big investor, but do have some investments. I don’t have a lot of knowledge on this and reading your article really explained this current downturn market in easy to understand terms. Eight great ideas and ways to stay steady in the market.

    • Thanks! People in that situation, who have money invested but don’t spend a lot of time immersed in it, are exactly who I wanted to write this for. Times like these, though totally normal, tend to come with lots of scary headlines and panic in the air. In reality, doing nothing is the healthiest move for almost all of us, but it’s trying to protect ourselves from all that scary news that gets us into trouble in the first place.


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