7 Lessons You Can Learn From How Wealthy Americans Weather Market Turmoil

The stock market has seen some dramatic ups and downs in recent months. For most Americans, this volatility is unnerving to watch. While wealthy Americans may also feel distressed, many make similar money moves to preserve their wealth. As you build wealth, making similar money moves might help you protect your own portfolio.

This guide explores what you can learn from how wealthy Americans are weathering market turmoil.

Diversifying beyond stocks

The stock market offers an accessible way for Americans to start building an investment portfolio. But investing in stocks isn't the only way to grow and preserve wealth. Instead of staying pigeonhole into the stock market, wealthy Americans are choosing to diversify their portfolio with other assets.

Wealthy Americans may be adding real estate, private equity, and gold to their portfolios as alternative assets to reduce their reliance on the stock market while continuing to grow their wealth.

Keeping cash ready

Regardless of market conditions, a robust emergency fund can be handy. But in times of market turmoil, keeping cash ready is especially important.

Many high-net-worth investors are choosing to hold onto higher cash reserves. This gives them the buffer required to ride the market's ups and downs and allows them to jump into new investment opportunities when asset prices drop.

Focusing on quality investments

During times of turmoil, wealthy investors tend to focus on buying high-quality, income-generating assets. Blue-chip stocks and bonds with strong credit ratings seem especially appealing as the market continues its rollercoaster ride.

In better market conditions, the same investors might be willing to take a chance on a less well-known company in hopes of boosting their returns. But for now, many investors are content to keep their funds in play with well-established options.

Taking advantage of estate planning strategies

A downturn in the stock market can actually benefit some wealthy Americans who want to minimize tax liabilities when transferring wealth to the next generation.

When stock values are down, wealthy Americans can transfer assets intended for their heirs ahead of schedule. This move can lead to significant tax savings since the stock market is lower than usual.

As of writing, taxpayers can transfer up to $19,000 per person without a tax penalty under the gift tax exclusion. Larger gifts can be transferred as a credit under the lifetime ift and estate tax limit.

Staying disciplined and avoiding panic selling

While the market fluctuates, wealthy investors are disciplined and choose to stick with their long-term investment strategies. Instead of panicking and making a decision to sell to minimize short-term losses, they stay for the long term.

Keeping the past in mind

While staying laser-focused on the news and its impact on the market is easy, many wealthy Americans simply avoid taking the headlines to heart. The market has indeed seen some extreme swings lately. But it's also true that the market has gone up and down in big ways throughout its history.

The market will generally recover. Bull and bear markets are part of the natural business cycle. Keeping this in mind might help investors stay focused on long-term returns instead of short-term losses.

Looking for additional income streams

In turbulent economic times, losing a job can wreak havoc on your financial future for years. Many wealthy Americans combat this possibility by building up multiple income streams to support their expenses. If one income stream falls during a tight economy, the others can help support the ship.

Of course, many people have a job that brings in money. But building up a side hustle could help you enjoy more financial security, regardless of what the market is doing. Some ideas include moonlighting as a freelancer, buying income-generating rental properties, renting out extra bedrooms, flipping thrift store finds, or starting a small business.

Bottom line

Building wealth takes time. However, for those who gain wealth, maintaining it often involves careful strategy during market downturns. As you work on your financial fitness, consider practicing the money moves that wealthy individuals make during extreme market volatility.