1. Cash your emotional and strategic buffer

The thing is, cash isn’t sexy. It doesn’t yield high returns. But during a stormy market, it does provide what every investor desperately needs: control and patience.

Why cash matters:

• Flexibility: Cash does not force you to sell good assets at bad prices. Your dry powder can be used when the markets fall, allowing you to buy quality stocks at a discount.
• Peace of mind: you are safe in that you could cover expenses or emergencies without touching the investments, hence not panicking on drawdowns.
• Opportunity fund: Crashes are like sales; only those with liquidity can take advantage. Cash lets you “buy fear and sell greed.”

How much is enough?

• That means 6–12 months of expenses in cash or near cash-what I call savings, liquid funds, or short-term deposits-for individuals.
• Investing 10–20% of a portfolio in cash equivalents during times of turmoil preserves optionality for the investor without giving up on long-term growth.

2. Bonds Stabilizers in the Storm

Bonds have traditionally been the shock absorbers in an investment portfolio, especially government and high-quality corporate bonds. They might not shoot up when the stocks soar, but normally they hold steady, or even gain, when the stocks fall.

Their main roles:

• Income generator: Bonds pay predictable interest, cushioning your portfolio against equity volatility.
• Diversifier: The bond prices generally move in the opposite direction of stocks, so if equities fall, the prices may climb as investors seek refuge.
• Capital preservation: Bonds help protect the principal, even if returns are modest, so your portfolio won’t swing as wildly.

But timing counts:

• When interest rates rise, the price of bonds falls, so not all bonds behave alike.
• Shorter-duration bonds are safer in a rising-rate environment, while longer-duration bonds do well when the rates have started to fall again.
• So, think of bonds not as static “safe” assets but rather as dynamic tools that require thoughtful management.

3. Diversification: not putting all your eggs in one basket.

Diversification is one of the few ‘free lunches’ for investors. It does not eliminate risk but spreads it around so that a single shock will not bring down the entire portfolio.

Types of diversification:

• Across asset classes: mix equities, bonds, gold, real estate, and cash; each reacts differently to economic conditions.
• Across geographies: To begin with, do not depend on the economy or politics of one country. The US, India, and emerging markets seldom move in perfect sync.
• Technology, energy, health, and consumer goods are some of the diverse industries, each responding differently to inflation, innovation, and policy.
• If one area lags, another often compensates-smoothing returns over time.
• It’s like having multiple engines on an airplane; if one fails, the other ones keep you aloft.

 4. The art of balancing your personal mix

• The right mix between cash, bonds, and equities depends on one’s risk tolerance, goals, and timeline.
• Time smooths volatility, and the young investor can afford more equities and fewer bonds.
• A near-retirement investor may want 40–50% in bonds and some cash for stability and income.
• Slightly increased cash and high-quality bonds during high-uncertainty times, such as during a recession or global crisis, help to ride out the storm.
• Also, being invested, even in volatility, is generally always better than trying to time the market just right.

 5. The human side managing fear and greed

• Volatility is also a psychological test, not just a financial one.
• Cash tends to quieten fear: “I have reserves”.
• Bonds provide comfort: “Not everything is falling.”
• Diversification provides perspective: “Some parts of my portfolio are still strong.”

Put them all together, and they help you avoid making emotional short-term decisions that hurt your long-term goals.

 The main point is

• Cash = readiness and peace,
• Bonds = income and stability,
• Diversification = resilience & adaptability.

A volatile market is not an enemy; it’s a test of structure and discipline. Those who plan with the right mix of these three elements don’t just survive turbulence but often emerge stronger, buying wisely when others panic and holding steady when others despair.