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.
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%.
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.
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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.
The post Here’s how I’m trying to prevent a stock market crash from ruining my portfolio appeared first on The Motley Fool UK.
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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.
