How can I protect my investments during a market downturn?

You can protect your investments during a market downturn by diversifying your portfolio, investing in defensive assets, using stop-loss strategies, and maintaining cash reserves. These steps help reduce losses and keep your financial future secure even in volatile times.

1. Diversify Your Portfolio

A well-diversified portfolio spreads risk across multiple asset classes, reducing the impact of a downturn.

• Invest in stocks, bonds, gold, and real estate.
• Choose companies from different sectors.
• Consider global diversification to limit regional risks.

2. Invest in Defensive Stocks

Defensive stocks, such as those in healthcare and utilities, tend to perform well even in market downturns.

• Look for companies with stable earnings and strong demand.
• Consider stocks in essential services like FMCG and pharmaceuticals.
• Focus on dividend-paying stocks for steady income.

3. Use Stop-Loss Orders

Stop-loss orders automatically sell your stocks when they reach a predetermined price, preventing major losses.

• Set stop-loss levels to match your risk appetite.
• Use trailing stop-loss orders to secure profits.
• Regularly review and adjust stop-loss levels.

4. Maintain Cash Reserves

Keeping cash on hand provides stability and allows you to take advantage of buying opportunities during market corrections.

• Keep at least 10-20% of your portfolio in cash.
• Avoid being fully invested in volatile markets.
• Use cash reserves to buy undervalued stocks.

5. Hedge with Gold and Bonds

Investing in gold and bonds can protect your portfolio from extreme volatility.

• Gold typically rises when stock markets decline.
• Bonds offer stable returns in uncertain markets.
• Allocate a portion of your portfolio to these safe-haven assets.