Protection during market downturns
Defensive Strategies for Capital Preservation
Proactive protection measures help portfolios weather market storms and emerge stronger during recoveries.
Downturn Protection Toolkit
1. Defensive Positioning
| Strategy | Implementation | QuantWave Tools |
|---|---|---|
| Quality Tilt | Overweight low-debt, high-cash companies | Fundamental Strength Scores |
| Sector Rotation | Increase staples, utilities, healthcare | Sector Risk Analytics |
| Cash Buffer | Maintain 10-15% liquidity reserve | Liquidity Dashboard |
2. Direct Hedging Instruments
- Put Options: Portfolio insurance
- Inverse ETFs: Short market exposure
- Gold: Traditional safe haven
- Long Volatility: VIX-related products
QuantWave Protection Systems
1. Storm Guard Alert
- Early warning system for trend reversals
- Volatility spike detection
- Correlation breakdown alerts
2. Stress Test Simulator
- Models 2008-style scenarios
- Calculates potential drawdowns
- Suggests preemptive adjustments
Implementation Framework
The 5-Level Protection Plan
- Preparation (Always): Diversification, quality focus
- Early Warning: Reduce risk assets 10-20%
- Downturn Confirmed: Implement direct hedges
- Severe Stress: Increase cash to 25-30%
- Recovery Signs: Gradual re-risking
Common Protection Mistakes
- Waiting too long to act
- Over-hedging (cost drag)
- Panic selling at lows
- Ignoring rebalancing opportunities
Performance Metrics
- Drawdown reduction achieved
- Hedge cost/benefit analysis
- Recovery time improvement
- Stress test compliance
QuantWave's downturn protection system helps investors navigate turbulent markets with confidence. By combining early warning signals with disciplined hedging strategies, portfolios can limit losses while maintaining participation in eventual recoveries.