If the Sharemarket Crashes in 2026, This is How to Survive It.

Unfortunately, sharemarket crashes are an unavoidable part of investing. Over the past three decades alone, Australia’s investors have endured three major sharemarket corrections – the dot.com collapse, the Global Financial Crisis and the COVID-19 market shock – as well as several smaller dips.

Now, in 2026, many commentators are suggesting another major correction may be on the horizon. After all, with the All Ordinaries trading at a price-to-earnings ratio of almost 23 (well above its long-term average of around 17), oil prices rising and geopolitical tensions at new heights, the conditions that have historically preceded major corrections are increasingly hard to ignore.

If that happens, many portfolios built for growth might suddenly look very exposed.

So, if you’re concerned about whether your portfolio is built to survive a sharemarket crash, read on.

Why sharemarket crashes are so hard to predict

Although market downturns occur reasonably regularly, it’s very difficult to forecast exactly when they’ll happen.

In many cases, share prices can continue rising for years despite widespread concerns about valuations, economic growth or geopolitical tensions – especially if investor optimism, strong corporate earnings and positive momentum continue to hold.

At the same time, the events that ultimately trigger market corrections often come without warning. A sudden change in interest rate policy, an unexpected geopolitical shock or even just a shift in investor sentiment about a new technology can all cause markets to tumble. And, in today’s interconnected global economy, problems in one market can quickly spread to others.

The Global Financial Crisis – which caused the ASX to fall by 54.5% between November 2007 and March 2009 – was triggered by poor lending practices in the US mortgage market, thousands of kilometres from Australia. While the dot.com bubble of 2000, by contrast, grew from extreme enthusiasm for tech start ups, which led to gross over-valuations. When the bubble burst, share prices in sectors as diverse as media, telecommunications and retail began to plummet around the world.

That’s why many experienced investors focus less on trying to forecast crashes and more on building portfolios that can withstand them.

The danger of concentration

When markets turn volatile, one of the biggest risks investors face is portfolio concentration – or having too much wealth tied up in one asset class, sector or country.

And, it’s a risk many investors face right now.

Since early April 2025, the ASX 200 has lifted almost 16% and the S&P 500 has gained over 30%. That rapid growth has tilted many portfolios towards shares – which means, if markets do turn, those same portfolios have more to lose.

This risk can be compounded by the growing popularity of ETFs. These products are frequently seen as a safer alternative to direct share investment. And in some ways they are.

The issue isn’t necessarily the ETF structure itself, it’s what’s inside it – because many of these products buy parcels of shares in the largest listed companies.

For instance an ETF that invests in the ASX200 is likely to have well over 50% of its exposure concentrated in just two industries – financial services and resources. Meanwhile, US or globally-focused ETF are often weighted towards the same large tech companies that many analysts currently consider overvalued.

In both cases, what looks like a diversified investment can still carry significant concentration risk.

A portfolio that maintains balance across shares and other asset classes is better placed to stay resilient even if the sharemarket turns sharply.

6 tips for building a resilient portfolio

With that in mind, here are six steps that can give your portfolio a better chance of not just surviving a sharemarket crash, but emerging from one in better shape than you went in.

1. Spread your investments across different asset classes

One of the simplest ways to reduce risk in a portfolio is to spread investments across different asset classes rather than concentrating everything in shares. Not all investment classes move up and down in unison; some have very little correlation with each other. In fact, some have very little correlation with each other at all, which means losses in one area can be cushioned by stability in another.

For most investors, a genuinely balanced portfolio will include a mix of some or all of the following:

• Shares are typically considered growth assets. They can deliver strong long-term returns, but can also experience significant swings in value during market downturns.
• Property attracts many Australian investors for its rental income and history of long-term capital growth. However, property markets go through cycles too. Barriers to entry are high purchase costs, stamp duty and ongoing maintenance all add up. Also, in a downturn, property can be much harder to sell quickly than other asset classes.
• Investments like savings accounts and term deposits are simple and exceptionally safe. The Australian government guarantees deposits of up to $250,000 per person per authorised deposit-taking institution. The trade-off is that cash typically pays lower returns than other asset classes, and in high-inflation environments it can lose purchasing power over time.
• Fixed income. Fixed income investments – such as bonds, corporate debt and other credit-focused products – can provide regular, predictable income. They typically experience less volatility than shares while often delivering better returns than cash, which makes them a useful middle ground in a diversified portfolio.

By combining several of these asset classes, investors can reduce the risk that a downturn in any one area will have an outsized impact on their overall wealth.

2. Diversify within each asset class (by country, sector, etc)

Even if investors spread their money across several asset classes, portfolios can still become concentrated if each investment is exposed to the same underlying risks. So true diversification means not just investing across asset classes, but diversifying within them too.

• Rather than concentrating on a handful of industries or companies, you can spread share investments across different sectors, company sizes and global markets. An Australian investor with holdings only in local banks and miners, for instance, is more exposed than one whose share portfolio spans healthcare, technology and international markets as well.
• Exposure to property doesn’t have to mean owning a single residential investment property. Listed property trusts (REITs), companies that develop or build properties across different markets, and mortgage or property finance investments can all provide exposure to real estate with a different risk profile to direct ownership.
• Fixed income. Government bonds, corporate bonds and private credit investments can all behave quite differently depending on economic conditions and interest rate movements. A fixed income allocation that includes a mix of these is generally more resilient than one that relies on a single type.

Because each of these investments responds differently to changes in the economy, diversifying within asset classes (and not just across them) can help smooth portfolio performance over time.

3. Include both growth and defensive assets

Most successful investment portfolios contain a mix of growth assets and defensive assets, and understanding the difference between them matters.

Growth assets, such as shares and property, are designed to deliver long-term capital appreciation. They can generate strong returns over time, but they also experience significant swings in value when markets turn volatile.

Defensive assets, such as cash and fixed income, prioritise stability over growth. They’re designed to hold their value and keep paying income even when sharemarkets fall sharply, when that steadiness matters most.

While a traditional approach to portfolio construction has focused on holding 60% growth assets and 40% defensive assets, that’s not necessarily right for everyone. Instead, the best balance between the two will depend on your circumstances, your timeline and how much volatility you’re comfortable with.

That said, for most investors, some exposure to defensive assets isn’t just a nice-to-have. In a downturn, it’s often what will keep their portfolio intact.

4.  Understand that different defensive assets play different roles

Just as growth assets vary in their risk profile and purpose, so too do defensive assets. Holding “something defensive” isn’t usually enough –  the type of defensive investment matters, because different options behave differently and serve different purposes within a broader investment portfolio.

●     Cash held in savings accounts or term deposits provides stability and immediate access to funds. It’s simple, predictable and government-guaranteed (up to $250,000 per person, per institution). The limitation is that over long periods, cash can struggle to keep pace with inflation, meaning its real purchasing power quietly erodes.

●     Government bonds, including Australian and US treasury bonds, involve lending money to governments. These are generally considered among the lowest-risk fixed income investments available. Returns are modest but reliable, and they tend to hold up well during periods of economic stress.

●     Corporate bonds involve lending to companies rather than governments. They typically offer higher income than government bonds in exchange for slightly more risk because companies are generally more likely to default than many governments.

●     Credit investments, including loans to businesses, property-backed lending and other debt-focused products, can offer more attractive income again. However, they tend to be more sensitive to economic conditions and interest rate movements than either government or corporate bonds.

Because these investments behave differently from each other, the most resilient portfolios typically include a mix of defensive assets rather than relying on just one.  Think of it less as choosing between defensive options and more as building a defensive layer with different instruments playing different roles.

5. Keep reviewing balance

Even well-diversified portfolios can drift out of balance over time, and that drift is often invisible until markets turn.

When one asset class performs strongly, it gradually takes up a larger share of your portfolio without you making any deliberate decision. The sharemarket rally since April 2025 is a good example: investors who started the year with a balanced mix of growth and defensive assets may now find their portfolios are more heavily weighted towards equities than they intended, leaving them more exposed to sharemarket fluctuations.

That’s why reviewing your portfolio regularly and rebalancing it where necessary matters as much as the initial allocation decision itself.

That said, rebalancing doesn’t mean constantly tinkering. It simply means periodically adjusting your portfolio so it continues to reflect your intended mix of growth and defensive assets by reducing exposure to areas that have grown quickly and adding to the assets that play a stabilising role.

Done consistently, this is one of the most effective and underrated tools available to long-term investors.

6. Make sure you can use downturns to your advantage

Market crashes can be deeply unsettling. But for investors who are prepared, they can also create real opportunity.

When markets fall sharply, high-quality investments can become available at much more attractive prices. As Warren Buffett – one of the world’s most successful long-term investors – famously put it, the time to be bold is precisely when others are panicking.

The investors who benefit most from recoveries are often those who were positioned to act during the downturn, not just survive it. For example, the ASX recovered its entire COVID crash loss in just over 12 months – one of the fastest recoveries on record.

But that kind of positioning requires preparation.

If all your wealth is tied up in volatile assets that fall with the market, you may have little choice but to ride out the downturn and hope for the best. Worse still, some investors find themselves forced to sell at exactly the wrong time, locking in losses just before markets recover.

Illiquid assets – or those you can’t sell easily – create a different problem. For instance, if your money is tied up in property, you simply may not be able to access it when an opportunity arises, regardless of how attractive that opportunity looks.

Holding some capital in stable, accessible investments, like cash and certain fixed income products, changes this equation entirely. It means you’re not just left waiting for markets to recover, you’ll be in a position to act when they’re falling.

In other words, a well-structured portfolio won’t just help you survive a sharemarket crash. It may put you in the driver’s seat for what comes after.

Preparing your portfolio for the next market cycle

No one can predict with certainty when the next sharemarket crash will occur. Markets rise and fall, and periods of volatility are a normal, if uncomfortable, part of the investing cycle.

What you can control as an investor, however, is how your portfolio is structured when those moments arrive.

A portfolio that spreads investments across different asset classes, diversifies within those assets, and maintains a genuine mix of growth and defensive investments is better placed to withstand market shocks and to recover from them faster.

Having capital in stable, accessible investments such as cash and fixed income can reduce the pressure to sell growth assets at the wrong time. It can also mean you’re able to take advantage of the opportunities that downturns inevitably create.

This is where fixed income, in particular, earns its place: not just as a defensive buffer, but as the part of your portfolio that keeps you in the game when others are forced out of it.