Hi,
A few weeks ago, I wrote about how I am preparing for the next market downturn.
I didn’t expect to start seeing early signs quite so quickly.
Nothing dramatic yet — but enough movement to shift how I’m thinking about risk and positioning.
So, I wanted to share, plainly, how I’m approaching markets.
1. Diversification means more than owning lots of stocks
Owning 10 stocks in the same sector isn’t diversification.
For me, real diversification means spreading capital across different economic outcomes:
Growth assets (equities)
Defensive assets (gold, cash-like instruments)
Real assets (property, commodities)
A small amount of optional upside (select asymmetric bets)
2. I’m not standing in front of a moving train
A stock being down 40% doesn’t automatically make it cheap.
And a fast-falling market doesn’t stop just because valuation models say it should.
There’s a difference between:
Buying weakness in a long-term uptrend
Stepping into a trend that hasn’t finished unwinding
Momentum doesn’t predict the future — but it does reflect current behaviour.
3. I am not building positions in one day
Even when I like the company. Even when the thesis feels obvious.
Markets rarely turn cleanly. They overshoot, retest, and punish impatience.
Scaling in overtime:
Reduces timing risk
Keeps emotions out of execution
Preserves capital if you’re early — which most people usually are
4. This feels like a stock-picker’s market
In rising markets, average businesses can look exceptional. In falling markets, only real quality tends to hold up.
This is where fundamentals matter again:
Balance-sheet strength
Pricing power
Durable cash flows
The ability to fund growth internally
5. I’m being ruthless about AI risk
I’m doing more of my own research here. I’m cautious around businesses that:
Sell commoditized services
Rely heavily on repetitive white-collar labor
Run thin margins with no real moat
Offer “process” rather than outcomes
I still think 2026 is when the gap between winners and losers becomes obvious.
Many companies won’t disappear — their economics will just quietly deteriorate.
I want to own businesses using AI to widen their moat, not ones whose moat is being automated away.
6. I don’t see cash as wasted
Cash isn’t a failure to invest. It’s optionality.
In falling markets:
Cash reduces forced decisions
Cash dampens portfolio volatility
Cash gives you flexibility later
That matters more than squeezing every basis point today.
7. Liquidity matters more than the story
Great narratives don’t save illiquid assets.
When conditions tighten, liquidity becomes a feature, not a footnote:
Can you exit without heavy slippage?
Are buyers still showing up?
Does the investment rely on cheap leverage staying cheap?
If something only works in perfect condition, it’s probably too fragile for this phase.
8. I watch earnings revisions, not headlines
Markets don’t really move on news. They move when expectations change.
I pay more attention to:
Forward guidance
Margin pressure
Analysts estimate revisions
Cost structures under strain
Prices usually fall fastest when future cash flows are quietly being revised down — long before the headlines catch up.
9. I separate volatility from real damage
Not all losses are the same. A volatile price isn’t the same as:
A broken balance sheet
A permanently impaired business model
Structural margin decline
The question I keep asking is simple:
Has the earning power of this asset changed?
If not, volatility is information — not a verdict.
10. My priority is surviving first
The first rule of compounding is staying in the game.
You don’t need to catch the bottom.
You don’t need to outperform in every cycle.
You do need:
Controlled drawdowns
Emotional discipline
A process you can repeat when things feel uncomfortable
The takeaway
Falling markets don’t reward speed. They reward structure, patience, and selectivity.
You don’t need to be bold today.
You just need to still be standing when the trend eventually turns.
You’ve got this.
— Ben