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.

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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.

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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.

Should you invest £1,000 in Aston Martin 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 Aston Martin made the list?

See the 6 stocks

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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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