Stay Steady, Stay Ready: Crisis-Proof Investing

The market’s been feeling a bit…jittery lately. With all the talk about tariffs and potential trade wars, it’s easy to feel a little uneasy. We all know the market has its ups and downs, and right now, it feels like there’s a lot of uncertainty in the air. That’s just how it works. And while no one has a crystal ball to predict the next big dip, we can get ourselves ready. Learning from past market hiccups can help us keep our heads and navigate whatever comes our way.

Keep calm and carry on (don’t panic sell!)

One of the biggest mistakes people make during a downturn? Selling everything in a frenzy. It locks in your losses and makes it a real slog to recover. Think back to 2008 or 2020 – ouch, right? But those who held on saw things bounce back, big time. History tells us, markets tend to recover. So, patience is your friend. If you’re feeling a bit uneasy, take a step back and remind yourself of your long-term goals. Chatting with a trusted investment professional can also help keep you on track.

Mix it up: Diversification is key

You’ve heard it before: don’t put all your eggs in one basket. That’s especially true for investing. Diversifying across different asset classes – stocks, bonds, real estate, private equity, infrastructure, you name it – can help smooth out the ride. When one investment is down, another investment might be holding steady. During tough times like the 2008 crisis, people with diversified portfolios fared better than those who concentrated their investments. An investment portfolio that includes different sectors, a range of asset types, and alternative investments—such as real estate, infrastructure, or commodities—may offer an additional layer of stability during periods of market turbulence.

Stick to your plan (even when it’s scary)

Having a solid investment strategy tailored to your goals is crucial. It gives you a roadmap when things get a little chaotic. Trust your plan, even when the market looks shaky. It’s about avoiding those emotional decisions that can throw you off course. Regular check-ins with your advisor are a good idea to make sure your plan still fits your needs. Remember, market dips are a normal part of investing, not a signal to bail.

Spot the opportunities

Believe it or not, market downturns can actually be a good thing. They can create opportunities to buy quality investments at a discount. Take the 2020 Covid-19 market dip, for example. Many strong companies saw their stock prices drop. Savvy investors who bought in did pretty well when the market rebounded. If you have some cash on hand, consider adding to your portfolio strategically. But always do your homework and chat with your financial advisor first.

Focus on what you can control

You can’t control the market, but you can control how you react. Stick to your savings plan, keep an eye on your spending, and avoid making impulsive decisions. If you’re retired or nearing retirement, consider adjusting your spending temporarily to preserve your portfolio during a downturn. For example, delaying large purchases or scaling back discretionary spending can help maintain your investments’ longevity. Additionally, focus on building and maintaining healthy financial habits, such as regular contributions to your investment accounts and reviewing your budget. These small, consistent actions add up.

Understand the emotional side of investing

Human emotions often drive market fluctuations. Fear and greed are powerful forces that can lead to irrational decision-making. Understanding these emotions and how they affect investor behavior can help you make better decisions. Behavioral finance studies have shown that many investors tend to sell during market lows out of fear and buy during market highs out of overconfidence. This behavior leads to suboptimal returns. By recognizing these tendencies, you can strive to act rationally instead of emotionally during volatile times.

Learn from the past (history repeats itself)

History provides valuable lessons about market behavior. Studying past crises, such as the Great Depression, the 1987 Black Monday crash, the 2008 financial crisis, and the 2020 COVID-19 market crash, can offer insights into how markets recover and what strategies work best. For instance, during the Great Depression, diversification and patience proved critical. Similarly, in the aftermath of the 2008 crisis, long-term investors who stayed the course and avoided panic-selling reaped substantial rewards. By understanding these historical patterns, you can approach future downturns with greater confidence.

The Takeaway

Market downturns are a part of investing, but they don’t have to derail your financial future. By staying calm, diversifying your portfolio, and looking for opportunities, you can come out stronger on the other side. Focus on what you can control, stick to your plan, and seek guidance when needed.

At Alitis, we’re here to guide you through the ups and downs with personalized advice and a steady hand. Reach out to us today—together, we can navigate whatever comes next.

Sincerely,
Usman Afzal, CFA
Portfolio Manager
Alitis Investment Counsel