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How To Prepare For A Market Downturn

By Mark Thatcher, CRPC®

Cypress Wealth Services

For those of us who have ever lived through housing market crashes, stock market plummets, and full-on recessions, we know that downturns in the market can be downright scary. Foreclosed homes, filings for bankruptcy, retirement dreams cut short, and fear of the unknown are just a few examples of what can happen if someone is not prepared for less-than-ideal economic conditions. 

The good news is that there are things you can do to protect yourself from the worst-case scenarios should the need arise. It all comes down to making preparations and taking action by keeping these three things in mind.

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.” 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, 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). Use some (not all) of your capital to go into business ventures (e.g., buying a second home to use as a rental property), if that is what you desire. This method will not yield high short-term ROI, but it will prevent you from crashing and burning should the market go downhill. 

Don't Overleverage Yourself

While there is nothing wrong with taking a loan here and there, make sure you don’t go too deeply into debt to support your investments. Don’t buy more house than you can afford, and certainly don’t go too crazy with margin trading (e.g., borrowing money for stocks you normally would not be able to afford). You want to have a sustainable hold on your financial investments, even on temporarily borrowed capital, in order to keep your repayments lower and affordable. Should there be a market downturn, you can at least have some peace of mind that you will still be able to afford whatever money you need to pay back. 

Stop Trying To Predict When The Next One Is Coming

As tempting as it is to hold onto an investment and sell it at the height of the market right before the market plummets, don’t. No one can predict when the next market downturn will be. Even the experts get it wrong. Playing this game is a pure gamble, a risk that can result in a huge loss of money and assets when the cards don’t fall your way. This is one game you want to bow out of.

When you think about it, protecting your investments and assets creates a buffer between your money and whatever is to come in the market. You may not be able to control the future of the market, but you can at least take charge of how you handle your money today. 

Are you ready to see all your options for protecting your money? We at Cypress Wealth Services would love to start that conversation and answer any questions you may have. Call our office at 866.888.6563 or contact one of our offices today.


About Cypress Wealth Services 

Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services is comprised of professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs. Their experience and expertise act as a foundation for their client service process, The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With offices in Palm Desert, CA, Tustin, CA and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning and more. For more information: visit or call 760.834.7250.