What I will do during Market Downturn

Raising Cash Level

During market downturn, especially at the start, I will raise my cash level by selling lower quality stocks (even at losses). For this time, I also sell the stock if I am worried by holding the stock, as I prefer to sleep soundly. 

The raising of cash is to increase my warchest for deployment, if the market downturn worsens and quality stocks in my watchlist hit my buy prices. 

I never sell my equity holdings to $0, even during 2008-09 Great Recession. This is because I never know when the market recovers. If I have zero equity, I may miss out the subsequent market upturn. 

Buying quality stocks when they hit my buy prices

I would buy quality (or relatively safe) stocks when their prices fall to my buy prices. I will buy in tranches e.g. First tranche is bought at $X price. Second tranche will be bought 10-15% lower. Third tranche will be bought 25-30% lower. 

For example, during 2020, I bought UOB at $24, $22 and $20. (Note: For this downturn, I am not looking at Singapore banks now, as I prefer to buy SG banks at 1x book value or lower.)

My thinking

My equity portfolio will continue to lose money, as the downturn continue. I will hold the stocks that I want to hold. 

When I buy any stocks during the downturn, the prices of these bought stocks may continue to go lower and I cannot buy at the bottom.

I do not know how long / deep the downturn will be. 

Marco view

I expect the market downturn to continue for some time. S&P peak is at Feb 2025. I don't expect to see any market bottom soon. 

Based on the book 'The Long Good Buy' by Peter Oppenhiemer, event-driven bear market last average of 7 months and has average price falls of 30%. Structural bear market last average of 4 years and has average price falls of 50%. 

On Trump's policies, I think that he is serious in having tariffs to raise revenue for US government. He wants to see lower 10-year Treasury bond yield, as US government has a lot of debt maturing from 2H 2025.