{"id":226242,"date":"2025-10-27T07:23:13","date_gmt":"2025-10-27T07:23:13","guid":{"rendered":"https:\/\/adamfayed.com\/?p=226242"},"modified":"2025-11-06T07:09:11","modified_gmt":"2025-11-06T07:09:11","slug":"downside-protection","status":"publish","type":"post","link":"https:\/\/adamfayed.com\/it\/how-to-guides\/downside-protection\/","title":{"rendered":"Don\u2019t Panic When Markets Fall: How to Invest with Downside Protection"},"content":{"rendered":"

Are you interested in investments such as stocks, commodities, gold, silver or most assets for that matter, but you are worried about the downside if things go wrong?<\/p>\n\n\n\n

Well, read on, because this article is for you!<\/p>\n\n\n\n

As a way of introduction. I have been helping expat and high-net-worth clients for over a decade. I have changed my mind about something.<\/p>\n\n\n\n

Previously, I believed that people shouldn\u2019t worry about the stock markets falling if they own the whole market, for example, the S&P500, which tracks five hundred of the biggest companies in the world, rather than an individual company.<\/p>\n\n\n\n

The reason is simple. It is risky if you hold it short-term, but it isn\u2019t risky if you hold it long-term, as the graph below illustrates.<\/p>\n\n\n\n

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\"How<\/figure>\n<\/div>\n\n\n\n

However, in the real world, people panic. They sell when there is a stock market crash. They think \u201cthis time is different\u201d every time there is a crash, which are the four most dangerous words in investing, as per John Templeton\u2019s famous words.<\/p>\n\n\n\n

People watch the media.<\/p>\n\n\n\n

I saw it in 2016 when people didn\u2019t want to invest due to the possibility of Trump and Brexit happening.<\/p>\n\n\n\n

I saw it during 2020 with COVID at the start of the year, and worries about a disputed election at the end of the year.<\/p>\n\n\n\n

I also saw it at the start of the 2022 war between Russia and Ukraine.<\/p>\n\n\n\n

I also saw it on various occasions during much more minor events, such as various US Government shutdowns.<\/p>\n\n\n\n

Even though markets bounced back quickly from these events, and anybody buying at those lower levels has benefited, many people didn\u2019t stay invested.<\/p>\n\n\n\n

And yes, that included people who pledged that they would never be the person who panics!<\/p>\n\n\n\n

So, if you want to invest but are afraid of crashes and external events, what can you do?<\/p>\n\n\n\n

One strategy is just to invest in many different assets at the same time. Markets, bonds, gold, commodities and cash held together won\u2019t produce super high returns, but they will lower the returns during bad years like the 2008\/2009 Global Financial Crisis.<\/p>\n\n\n\n

With that being said, you will still see some volatility – for example, a 15% decline rather than a 50% fall during severe market turbulence. <\/p>\n\n\n\n

So, another option is to have downside protection<\/a>. Below are two examples:<\/strong><\/p>\n\n\n\n