Here’s how I’m trying to prevent a stock market crash from ruining my portfolio

Jon Smith explains which shares he’s avoiding and what he’s thinking of buying to try and protect his portfolio from a potential stock market crash.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

This week hasn’t been a great one for stock markets around the world. On Wednesday (17 July) the Nasdaq index had the worst day since 2022. Here in the UK, the FTSE 100 has fared better, but is still on track to end the week lower than where it started it.

With renewed chatter about a stock market crash, here are the actions I’m taking.

Avoiding sensitive areas

Based on the movements this week, the sectors that have performed the worst have been tech and consumer discretionary.

Should you invest £1,000 in Shell right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Shell made the list?

See the 6 stocks

Tech’s a broad category, but includes the mega-cap companies such as Amazon, as well as the likes of Nvidia that are focused around artificial intelligence (AI). To some extent, it’s unsurprising this area’s falling, as it’s risen so fast, so quick.

Even though we aren’t in a crash right now, some investors are clearly concerned this sector might be in a bit of a bubble.

Consumer discretionary stocks have also struggled. This includes the luxury brands such as Burberry, which is experiencing much weaker demand around the world. It’s true these stocks tend to perform badly when consumers are tightening their financial belts.

So to avoid my overall portfolio performance getting hampered further, I’m staying away from investing in these two areas right now.

Finding pockets of opportunity

If the market does crash, there are a couple of sectors I think will help to support my overall portfolio. One’s consumer staples and the other’s real estate.

I’m considering adding a real estate investment trust (REIT) to my investment pot. For example, Primary Health Properties (LSE:PHP) as the trust’s up 3% over the past year, and has a dividend yield of 7.13%.

Created with Highcharts 11.4.3Primary Health Properties Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The trust owns 514 properties with a portfolio worth £2.8bn of healthcare facilities. It leases and lets out these properties to the NHS as well as private firms. The income it receives can then be partly paid out to shareholders in the form of dividends.

I like the REIT to protect myself as I feel the income’s very sustainable. Tenants such as the NHS are unlikely to go bust and not pay. Further, even if a market crash does temporarily push the share price lower, I’m happy to be patient for a recovery, given the above average dividend yield.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

As a risk, the firm does operate in a niche area. Should there be any major changes to the health service as part of the new government, Primary Health could experience some problems.

Keep calm, carry on

It’s true that any stock market crash would likely cause a lot of short-term panic. Even the correction over the past couple of days has brought some commotion. Yet on top of the above actions, my last one’s simply not to panic sell, or make rash decisions.

History shows that sharp drops often rally in the long term, so I want to maintain this mindset.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon, Burberry Group Plc, Nvidia, and Primary Health Properties Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing For Beginners

Smart young brown businesswoman working from home on a laptop
Investing Articles

Could BP’s share price rebound over the next 12 months? These analysts think the answer is ‘yes’!

BPs share price has plummeted over the last year. But City brokers think things are about to turn around, as…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

3 FTSE 100 safe haven stocks to consider as trade wars bite

I'm confident in the long-term outlook for the FTSE index of stocks. But these blue chips may protect investors from…

Read more »

Investing Articles

2 cheap FTSE 100 and FTSE 250 shares to consider for an ISA before 5 April!

These FTSE 100 and FTSE 250 shares are on sale today! Here's why long-term Stocks and Shares ISA investors should…

Read more »

Investing Articles

How I’m building a new second income for 2035

Millions of us invest for a second income. Here are the steps Dr James Fox is taking in order to…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Investing Articles

3 top FTSE 100 shares to consider for a new ISA

The FTSE 100 is packed with top-notch companies that can form the building blocks of a quality Stocks and Shares…

Read more »

Investing Articles

Is buying gold stocks the best way to capitalise on bullion’s bull run?

Forget about gold bars, coins, and funds for a moment. Here's why considering gold stocks could be the best option…

Read more »