If your portfolio has made solid gains but you’re worried about volatile positions—maybe crypto, risky stocks, or other speculative investments—I want to share the method I’ve been using professionally for more than two decades. These strategies are proven, tested, and have protected my portfolios through every major market event of the past 20 years.
The GPI System: A Framework for Balanced Investing
Before we dive into specific protection strategies, let me introduce you to my GPI system—a framework I’ve perfected over 20 years of professional investment management.
G is for Growth. Growth beats inflation. You must have growth in your portfolio to build your future financial security. Without growth, you’re essentially treading water.
P is for Protection. This is what this post is all about. Think of protection like insurance against uncertain times. Every good portfolio—a properly balanced one—must have an element of protection built in.
I is for Income. Income is useful for those who need cash flow today. Whether you’re retired or building passive income streams, this component provides financial breathing room.
A perfectly balanced, diversified portfolio should have at least two of these three essential ingredients. Today, we’re focusing entirely on protection—the insurance policy for your wealth.
Strategy #1: Gold as Your Portfolio’s Insurance Policy
I own gold as an insurance policy alongside my stocks and ETFs. It’s a key part of my GPI portfolio, and for good reason.
Gold is a phenomenal safe haven and usually performs exceptionally well during periods of general volatility. Don’t just take my word for it—look at the historical evidence. Go back to the dot-com bubble when it burst. Look at the global financial crisis. Examine the COVID correction. And if you remember 2022, when both bonds and stocks were under pressure because interest rates were climbing, gold shined through every single time.
That’s why it’s such a great insurance policy to hold alongside your stocks and ETFs.
But here’s where it gets even better: we also use options on gold. Not just to own it and benefit from this insurance policy, but to earn income while holding it. It’s a two-fold strategy—protection plus cash flow.
Physical Gold vs. ETFs: The Clear Winner
One important note: gold is much better when held in ETFs rather than physical gold. Not only do ETFs track the gold price accurately, but they also protect you from tax complications, avoid storage costs, and are far safer than owning physical gold held in random vaults somewhere. The convenience and security factors alone make ETFs the superior choice.
Strategy #2: Options for Safety Margin
Now, this may sound surprising, but options can actually be a less risky way to invest compared to buying stocks in the usual way. Options let you invest with a built-in safety margin and earn income at the same time.
Let me explain how this works.
If you select a good quality stock or ETF—or if you own gold or silver through ETFs—and it goes up by 5%, you make 5%. Simple enough. But if straight after purchase it goes down by 5%, guess what? You lose 5%.
With options, however, you have a margin of safety. If the asset drops by 5%, you’re protected because you’re not buying the stock or ETF or gold at the current price. You’re buying it at what’s called the strike price—a price below the current market valuation. That’s your safety cushion.
And regardless of what happens to the stock price, you’ll still make income on the options. So not only does it give you a safety margin, it also provides ongoing income. It’s a win-win setup.
Strategy #3: Options as Direct Insurance
Options can also be used as a more direct hedge—essentially, insurance for your portfolio. We do this by buying put options, and it works exactly like your car or home insurance.
Here’s a practical scenario: Let’s say you own something that’s performed really well—a stock, an ETF, gold, silver, whatever. It’s done brilliantly and is now near all-time highs. You don’t want to sell it because you’re a long-term holder, but you’re nervous about a potential pullback.
What you can do is pay a relatively small options premium—call it an insurance premium—to cover you against any losses on that position if they happen. It’s a brilliant way to protect yourself against downside risk.
The worst that can happen is you’ll lose that option premium. But you’ll continue to enjoy the upside on your stocks. If the stock does come down, though, you’ll actually make money through your options insurance premium. It’s the best of both worlds.
Strategy #4: Diversify Globally (Don’t Just Buy the S&P 500)
I see a lot of investors who just buy the S&P 500 index—pure US equities. Here’s the problem with that approach: the US is at a 75-year high versus the rest of the world.
Some investors are concerned about a tech bubble in the US stock market, and frankly, the US has actually underperformed this year for the first time in a while. It’s underperformed the rest of the world by a significant margin.
My message is simple: don’t just buy the S&P 500 index. You need to be globally diversified.
Actually, there are some really interesting developments happening in the rest of the world right now. There’s tremendous growth and positive momentum in Asia—in China and India. Europe has some fascinating stories unfolding too. Both of these regions have outperformed the US this year and will probably continue to outperform going forward.
If you want to create a more diversified, balanced portfolio—and if you want genuine protection—don’t just own the US. Own the world, which also includes the US.
Remember: the US is just one country, dominated by one huge sector (technology), and it’s being run by a president who can say or do anything to crash the US stock market, just like he did with his tariff announcement. That’s concentration risk at its finest—or worst, depending on your perspective.
Strategy #5: High Dividend Stocks and REITs
High dividend stocks and REITs are fairly defensive investments. They tend to hold up reasonably well during market turbulence.
Let me give you an example. I own a UK high dividend ETF that gives me a 5.3% dividend yield every year, plus it’s delivered capital gains over the last five years. That’s the beauty of this approach—you get both income and growth.
Here’s the key insight: in a downturn, dividends hold up much better than capital values. So if you’re looking for added protection, own assets, ETFs, and stocks that give you higher dividend yields plus some potential for capital gain. This combination provides a much smoother, much more defensive exposure to stocks.
Living Off Dividends: The Ultimate Goal
There are countless people in Europe and the US who have been holding high dividend stocks for years—even decades—and they’re now in the fortunate position of being able to live off their dividends. They continue to own their stocks for capital growth but can fund their day-to-day income needs entirely from dividends.
It’s a really smart strategy: own high dividend stocks that are also quality companies—blue chip, solid, dependable businesses that happen to pay very attractive levels of dividends. This is building wealth and income simultaneously.
Strategy #6: Do Nothing (The Long-Term Investor’s Secret Weapon)
For long-term investors, one very good option is to do nothing. Seriously.
The legendary ex-Fidelity fund manager Peter Lynch described it perfectly. He said, “More money is lost waiting for corrections than in the corrections themselves.”
Making predictions is easy, but timing is incredibly hard to get right. Remember, you have to sell at the right time AND buy back at the right time—which is almost impossible to execute consistently.
Look at the last hundred-plus years. All of the crises we’ve lived through—recessions, pandemics, wars, interest rate spikes, financial crises—markets always bounce back regardless of what the event is.
So instead of trying to time the market, sometimes it’s far better just to buy during downturns, not sell. My investors and I do exactly that. We use pound cost averaging to drip feed money systematically into the market to take advantage of volatility. Use volatility to your advantage, not as a reason to panic.
Strategy #7: Stop Losses (With an Important Caveat)
You can put stop losses on your positions, but let me explain both the theory and the reality.
How do stop losses work? You buy a stock or ETF, and if you’re concerned about a potential decline, when you place the trade you can leave an automated instruction that gets you out in case it gets worse. So you might set a stop-loss at, say, 10% lower. If it drops worse than 10%, you’re automatically out at that level.
A stop-loss sounds sensible as a protective measure, right?
But here’s the problem: in reality, stop losses can make you sell at the lows when you should actually be buying at the lows. I’ve made a detailed video on stop-losses that really changed the way people think about them, and it shows a far better alternative using options.
This alternative approach not only limits your downside and gives you downside protection, but it also provides income. It’s a superior strategy in almost every way.
Bringing It All Together
Protection isn’t about being pessimistic or fearful—it’s about being smart. It’s about building a portfolio that can weather any storm while continuing to grow your wealth.
These seven strategies have been battle-tested through two decades of professional investment management. I use them in my own portfolio, and my clients rely on them to protect their gains while staying positioned for future growth.
Remember the GPI framework: Growth, Protection, and Income. When you have at least two of these three elements working together, you create a portfolio that’s not just profitable but resilient.
The markets will always have ups and downs. The question isn’t whether volatility will come—it’s whether you’ll be protected when it does.
