No one’s got a crystal ball that predicts the markets, so trying to know when a dip is going to happen is nearly impossible. But that doesn’t mean you can’t be prepared for them. Here’s our list of 4 ways to structure your portfolio for market dips.

Don’t put your eggs in one basket

Diversification is all about spreading your money out across a whole variety of investments. A diversified portfolio will help even out the effect that a market dip has across your portfolio. You can diversify across different markets internationally, industries, and types of investments (like stocks or ETFs). 

Cover all your bases - growth & value stocks

Growth stocks are shares in companies expected to grow at a faster rate than average, meaning they can sometimes be more volatile, and less likely to pay dividends. 

Value stocks are companies that are considered to be undervalued, tending to be more mature, less volatile and are more likely to pay dividends. 

When a market dip happens, value stocks tend to perform better than how they perform in rising share markets. In comparison, growth stocks tend to perform worse during market dips and better in rising share markets. 

Diversifying across both will help you survive and thrive in market dips.

Defend yourself

Defensive stocks are shares in companies that are well-established, meaning they have strong cash flows and pay dividends regularly. 

Due to their survival and success for many years, they’ve weathered many market dips, so they’re generally more stable. They tend to stay relatively steady compared to the large drops many others would face in the overall market. Having these guys in your portfolio will do you well in good times and bad. 

Think before you sell

Whilst it's always important to think before you sell, it's even more important to do during a market dip. Sometimes, companies start to fall in value with no real hope of turning around and selling can be best. However, too often, selling your investments in a dip because you feel nervous can be a backwards step, for when it turns around, you’ll probably have to pay a premium dollar to buy back in—or just face the fact you made a mistake. Just be sure to think things through when selling in market dips and review your portfolio regularly.

^{Investing involves risk. You aren't guaranteed to make money, and you might lose the money you start with.
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