Market Downturn? Your 4-Step Wealth Protection Blueprint

Let me paint you a picture. The S&P 500 just took a nosedive, and the NASDAQ's already in bear market territory. Sound familiar? That's because it happens more often than you think. Markets don't move in straight lines—never have, never will.

But here's the thing: this volatility isn't something to fear. It's an opportunity. A chance to buy quality assets at lower prices. And I'm going to show you exactly how to position yourself.

Why the S&P 500 Still Matters

Let’s start with the big one—the S&P 500. Why? Because it’s the backbone of most portfolios, and for good reason.

Think of it as your financial anchor. Whether you go with VOO, SPY, or Canadian alternatives like ZSP or VFV, these funds give you exposure to giants like Apple, Nvidia, Microsoft, and Amazon.

We're talking about companies that have consistently proven their staying power.

But here’s what really matters: despite the current turbulence, the S&P 500 has historically returned around 7-10% annually over the long term.

Sure, right now it's trading at a P/E ratio of 24.32, which is actually below its 5-year average of 26.4. Translation? It might be a decent entry point if you're thinking long-term.

One caveat: tech-heavy sectors dominate this index, making up nearly 60% of its weight. So if diversification is your goal, you’ll need to look beyond just the S&P 500.

The Case for Dividend ETFs

Now, let’s talk dividends. If you’re someone who likes getting paid while you wait for stock prices to recover, dividend ETFs are your friend. Take SCHD, for example.

This ETF doesn’t just give you dividends—it gives you *quality* dividends. Companies like Verizon, Coca-Cola, and Chevron are in there, and they’ve been paying shareholders for years.

Here’s why this matters: during the recent market downturn, SCHD only fell 2.1% YTD compared to the S&P 500’s 4.6%. That’s what we call resilience. Plus, with a current yield of 3.84%, you’re collecting cash even when markets are choppy. For Canadian investors, SMVP offers similar benefits with currency hedging built in.

Think about it this way: when the market gets rough, do you want to sit there watching your portfolio bleed, or do you want a steady stream of income coming in? Dividends can soften the blow and set you up for faster recovery.

Going Global Without Losing Focus

What if you want to spread your bets globally? Enter VT—the Vanguard Total World Stock ETF. With exposure to over 10,000 companies across 47 countries, it’s basically a one-stop shop for global diversification.

Yes, the U.S. still dominates (about 63%), but you also get slices of Japan, Europe, emerging markets, and more.

For Canadians, ZQT offers a slightly different mix, with a heavier weighting toward domestic stocks. It’s not perfect, but it gets the job done if you’re looking for simplicity.

Just remember: global diversification isn’t about chasing quick wins. It’s about protecting yourself from regional risks and tapping into growth wherever it happens.

When Safety Becomes Sexy

Sometimes, though, you need to play defense. Maybe you’ve realized you were too aggressive during the last bull run. Or maybe you’re older and can’t stomach another 2008-style crash. That’s where fixed income and safer assets come in.

Take HPYT, for instance. This Canadian ETF uses covered calls on treasuries to boost yields, currently sitting at 5.2%. Compare that to traditional bond ETFs like TLT, which yield around 3.1%. Not bad for something designed to protect your downside.

And then there’s cash. No, I’m not talking about stuffing money under your mattress. High-interest savings accounts and ETFs like SGOV or BIL offer yields between 4.35% and 4.8%.

In today’s environment, that’s nothing to sneeze at. These instruments won’t make you rich overnight, but they’ll keep you sane when markets go haywire.

Your Action Plan

So, what should you do? Here’s what we are doing:

• Core Holdings: Allocate 40% to broad-market ETFs like VOO or ZSP. They’re cheap, reliable, and give you instant access to top-tier companies.
• Dividend Power: Put 25% into dividend-focused ETFs like SCHD or SMVP. These provide stability and income, especially during downturns.
• Global Reach: Dedicate 20% to global diversification through VT or ZQT. Don’t put all your eggs in the U.S. basket.
• Defensive Posture: Keep 15% in safer assets like HPYT, SGOV, or high-interest savings accounts. You’ll thank yourself when volatility spikes again.

Remember, investing isn’t about timing the market. It’s about time *in* the market. The S&P 500 has recovered from every single correction since 1975, usually within about 8 months. Will this time be different? Maybe. But history suggests otherwise.

Here’s the bottom line: markets are cyclical. Corrections happen. Bear markets happen. But so do recoveries. Your job is to stay disciplined, stick to your plan, and focus on the long game. Because when everyone else is panicking, that’s when the real opportunities arise.

Stay sharp. Stay patient. And above all, stay invested.