Six portfolio fixes that could save you if 2025’s not going exactly to plan

• When markets are going against you, instead of panic-selling, you should formulate a strategy that takes advantage of the current market environment.

• Start by rebalancing your portfolio and re-evaluating your asset class weights, then consider protecting your portfolio against more losses using put options.

• Revisit the investment theses of all your stock holdings, form a smart plan of how to buy the dip, and, finally, make sure you learn from what happened.

After the US election, investors agreed on many things: they collectively bet on the country’s currency and against its government bonds and wagered that American stocks would outperform ones elsewhere. But those bets have been misfiring so far this year.US stocks are up, sure, but the S&P 500 is trailing an index of international stocks. In Treasuries, an initial spike has given way to a drop-off in 10-year yields. And the greenback has weakened by about 1% versus a basket of other major currencies.Over time, those plays could still turn out well. But, in the meantime, if you’ve been following the expert consensus, you might reasonably be wondering how best to roll with the punches. Here’s how in six easy steps…

1. Rebalance your portfolio

If you’ve invested by setting target allocations for various asset classes, you’ll probably find that your portfolio has drifted away from those targets. So the first thing to consider is rebalancing your portfolio to bring it back to its intended levels. Rebalancing, after all, forces you to take profits on asset classes that have performed well and to invest that cash into asset classes that have fared badly and are consequently cheaper. This ensures that you buy low and sell high – which is the goal, after all.

2. Re-evaluate your asset allocation

As you start to rebalance your portfolio, take a step back and re-evaluate your asset class targets, especially in light of the current market environment. As countries grapple with potential trade wars – which threaten to push inflation back up at the same time as major central banks have been looking to cut interest rates – some asset classes (and sub-asset classes) are likely to fare better than others. That, in turn, could warrant a change to your portfolio’s target asset allocation.

3. Inspect your stock holdings

If you own a bunch of different stocks, it’s worth properly revisiting your investment thesis for each one. It doesn’t matter whether the stock is down or up – the key question to ask yourself is as follows: if I didn’t already own this stock, would I buy it? If the answer is yes, resist the urge to panic sell if the price has fallen. You might even want to invest a little bit more if the price drops below a level you’ve predetermined. These are ideally stocks of high-quality, profitable companies that have been unfairly sold off. If, on the other hand, the answer to that question is no, consider selling your position – even if that means realizing a loss.

4. Protect your portfolio against more losses

Sometimes the best thing to do in a tricky market is nothing. Take a breath, turn off the news, and don’t check your account balances. That’s especially true if you have a sensible portfolio diversified across different asset classes, and your stocks all have sound investment theses that are still intact. But if you’re worried the rest of the year might work against your long-term holdings, it might be wise to buy some insurance to protect your portfolio.You can easily do this without having to touch any of your existing holdings by purchasing out-of-the-money “put” options on stock market ETFs. The additional benefit of using options is that their value increases with volatility, so they can protect you against both falling stock prices and rising market volatility. Just note that if markets end up going sideways or rebounding, you’ll lose the entire option premium, which is the cost you have to pay for crash protection.

5. Form a plan around buying the dip

Long-term investors know that markets eventually recover from short-term dips, so you should be positioned for any rebound. If you have some spare cash that you were planning to invest anyway, you should view any pullback as an excellent buying opportunity. But don’t just blindly buy the dip – have a smart way to go about it instead.One way to do that is via a strategy known as dollar-cost averaging: buying a constant amount periodically, regardless of the asset’s price. Let’s say you had $2,000 that you wanted to invest in an S&P 500 ETF. You could, for example, invest $400 into the ETF every week over the next five weeks. That strategy reduces the impact of volatility on the overall purchase and removes any element of trying to (unsuccessfully) time the market.

6. Learn from what’s happened

The best investors in the world don’t get emotional or blame external circumstances for their losses. They own up to their mistakes and learn from them. Only by learning from mistakes can you avoid repeating them, which will help you avoid big losses again in the future.So if your portfolio has taken a hit this year, it’s very important to ask yourself why that happened. Were you, for example, overly concentrated in US dollars and stocks? Then that’s a genuine mistake you’ve made, and the key lesson to take away is to better diversify your portfolio across different regions and asset classes.

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