How I’d position my ASX share portfolio for the next market crash

The S&P/ASX 200 Index (ASX: XJO) is climbing higher today but I’m looking ahead to the next potential ASX market crash…

| More on:
ASX mining shares iron ore price share price falling represented by cartoon of little business men falling off broken graph arrow

Image source: Getty Images

Many investors were spooked by the March bear market. ASX share prices were hammered across most sectors and even experienced players were worried. So, how can you position your portfolio for another ASX share market crash?

How to position your ASX share portfolio for another market crash

I think portfolio construction can sometimes be overcomplicated. In the end, it’s all about cash flow which flows through to valuation and growth.

Normally, when the market is volatile, cash is king. There’s a ‘”bird in the hand” theory, that returns today in the form of dividends are worth more than future returns from promised growth.

However, we’ve almost seen the opposite in 2020 thanks to the ‘two-speed’ economy. Growth shares likeĀ Afterpay LtdĀ (ASX: APT) andĀ Xero LimitedĀ (ASX: XRO) have outperformed theĀ S&P/ASX 200 IndexĀ (ASX: XJO) by some margin.

That might tempt some investors to go all-in on growth and do away with ASX blue-chip dividend shares. I won’t be following that trend as I think diversification is really the key here.

If we see another market crash, I’d like to have a bit of gold exposure in my portfolio. ASX gold shares have been surging as investors’ hawkishness continues to push global gold prices higher.

Given the potential mega-merger announced in recent weeks, I think theĀ Northern Star Resources LtdĀ (ASX: NST) share price is worth a look. The Northern Star share price is up 44.3% this year and could climb higher if we see another ASX market crash.

I also think a non-cyclical blue-chip share is good to have. That means I’d probably look to buy something likeĀ Coles Group LtdĀ (ASX: COL) for stable earnings and dividends through another period of volatility.

Finally, it’s worth thinking longer-term. The federal budget signalled that infrastructure could be the ticket out of the current recession. That means I’m looking at major construction and infrastructure groups for potential earnings on the back of juicy government contracts.

I think a major provider likeĀ Lendlease GroupĀ (ASX: LLC) could be worth buying as a speculative play for some growth and income upside in another ASX market crash.

No one has a crystal ball, so these are just a few shares I’d like to buy in the next downturn. Until we see another ASX market crash, however, I’m happy to sit tight with my current portfolio.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Portfolio Construction