How do you navigate a downturn prudently as an investor? 2025 has had its fair share of economic upheaval, particularly after “Liberation Day” in early April, when President Trump announced a stream of tariffs, upending the global order.
Much of the market turbulence has settled for now, following Trump’s 90-day “pause” on tariffs (to avert further damage to the US economy). For early-stage investors, however, such an environment may feel daunting. In this guide, we discuss how to build a resilient portfolio even when markets are under pressure.
We hope these insights are helpful. If you’d like to make sure you’re taking the right steps to safeguard your financial future, please get in touch.
The 2025 market backdrop
So far, 2025 has been a rough ride for many investors. The first quarter (Q1) looked promising, with the FTSE 100 experiencing +8.7% growth in total income (incl. M&A). In the US, things looked less rosy as tariff uncertainty hung over equity markets, leading to the worst start to a year since 2022.
Q2 marked a significant downward turn as investors panicked in response to the escalating US-China trade war. £4tn was swiftly lost from global stock markets – the steepest rout since the 2020 Covid Crash. Paradoxically, US Treasuries (typically a “safe haven” during an equity market sell-off) also saw a spike in yields over policy uncertainty.
Markets are calmer now that President Trump has toned down his protectionist rhetoric. Yet, uncertainty still hangs in the air, particularly over the US-China relationship.
These dynamics have left many early investors questioning whether they should stay invested, sell assets or wait for stability. Yet history suggests that downturns are a normal part of market cycles, often a precursor to future gains.
The mind of an investor during a downturn
When markets are volatile, emotions often override logic. Powerful “cognitive biases” can derail rational decision-making. Here are some examples that early-stage investors can fall prey to:
- Loss Aversion: Humans feel the pain of a loss twice as acutely as the equivalent pleasure of a gain. This can lead to panic selling during downturns, locking in losses that could have been avoided by staying invested.
- Recency Bias: This bias causes investors to overestimate recent events, assuming that current negative trends will persist indefinitely. As a result, they may underinvest just when opportunities are greatest.
- Herd Mentality: When headlines scream “market crash,” people tend to follow the crowd. However, reacting based on fear rather than fundamentals can lead to poor outcomes.
Awareness of these biases can help you make more objective decisions as an early-stage investor. When you feel strong emotions pulling at you, try to detach. Stick to the long-term plan you established beforehand, staying grounded in your financial goals and risk tolerance.
Your strategy during a downturn
In one sense, being an early-stage investor can be easier to stomach in a downturn. After all, there is no publicly available stock price fluctuating on a dashboard, in real time.
However, you can still be tempted to draw unhelpful conclusions about your investments as you digest an onslaught of negative headlines. Even experienced investors can be led astray. How can you minimise costly, impulsive mistakes?
A great starting point is to remind yourself of the nature of investing. Volatility is a natural part of markets, which have historically recovered from downturns.
Whether it was the 2008 financial crisis or the COVID sell-off in 2020, those who held firm and continued investing typically came out ahead. Investing is a long game. Attempting to “time the market” is nearly impossible, even for seasoned professionals.
As such, one of the best strategies to navigate a downturn is to nurture a long-term mindset. A second option is to review and rebalance your portfolio (if necessary). Ask yourself:
- Am I diversified across asset classes (stocks, bonds, cash, property)?
- Do I have excessive exposure to volatile sectors?
- Has my asset allocation drifted away from my target?
Your diversification might become skewed during times of volatility. By consulting with a financial adviser, you can correct this with strategic buy/sell orders to ensure your overall investment portfolio remains aligned with your risk tolerance.
Downturns can also be an opportunity to revisit the fundamentals of your startup choices. Due diligence is always important as an early-stage investor, but “cracks” can emerge in early-stage companies when they experience financial stress.
Here, the goal isn’t to abandon ship the moment you spot a problem. You will need discernment to judge if a “crack” (or collection of them) is significant enough to warrant that decision. Quite often, these stresses can refine and strengthen a startup as they reinforce weak areas.
Invitation
Whilst downturns can create buying opportunities, they also come with increased risk. If you’re unsure about your risk profile or don’t have the time or expertise to research investments thoroughly, consider speaking with a regulated financial adviser.
Want to speak to us about our early-stage opportunities here at our exclusive investor network? Get in touch today to explore our startup projects here at Bure Valley Group.
This article is for informational purposes only and does not constitute investment advice. Your capital is at risk, and the value of investments can go down as well as up. Past performance is not a reliable indicator of future results. The tax treatment of investments depends on individual circumstances and may change. Always seek regulated financial advice before making investment decisions.
