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The sleep easy ETF portfolio to survive market crashes

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a mature woman sleeps peacefully in bed with a smile on her face as though she is very satisfied about something.

Reporting season has been anything but calm.

In recent weeks, we have seen sharp moves across the market. High-quality software names such as WiseTech Global Ltd (ASX: WTC) and Pro Medicus Ltd (ASX: PME) have pulled back heavily on the back of results and AI disruption fears. Meanwhile, banks like ANZ Group Holdings Ltd (ASX: ANZ) and miners such as BHP Group Ltd (ASX: BHP) have pushed toward, or beyond, new highs.

If you are focused on individual stock picking, this kind of environment can feel exhausting.

One week, you are up double digits. The next, a headline wipes out months of gains.

And yet, broad-based ETFs tracking large indices have largely ticked along in the background.

That contrast says something important.

Volatility is normal

Individual shares can be wonderful wealth builders. They can also be wildly volatile.

Earnings misses, guidance tweaks, margin compression, AI threats, commodity prices, interest rates – each factor can send a single stock sharply higher or lower in a matter of hours.

For many investors, especially those building wealth alongside a career and family, that level of intensity is not sustainable.

A diversified ETF portfolio, on the other hand, spreads risk across dozens or hundreds of companies. Instead of betting on one narrative, you own the market.

That shift in mindset can make all the difference.

Start with the core: broad market exposure

A simple starting point is broad exposure to Australia and the US.

For example, the Vanguard Australian Shares Index ETF (ASX: VAS) tracks the largest companies on the ASX. It gives investors exposure to banks, miners, healthcare, industrials and more in one trade.

Similarly, the iShares S&P 500 ETF (ASX: IVV) provides access to 500 of the biggest businesses in the United States. That includes global leaders across technology, consumer brands, healthcare and financials.

Together, these two ETFs give exposure to thousands of billions of dollars’ worth of productive businesses.

When one sector stumbles, another often picks up the slack.

This kind of structure is consistent with the idea of building a portfolio you can “sleep through a market crash” with.

Add resilience, not complexity

Some investors go a step further and add diversification beyond equities.

That could mean including a global ex-US ETF, an emerging markets ETF, or even a bond-focused ETF to dampen volatility.

The goal is not to perfectly optimise returns.

The goal is robustness.

A robust portfolio is one that:

  • Survives bear markets
  • Reduces the temptation to panic sell
  • Encourages long-term contributions
  • Frees up your mental energy

The irony is that simplicity often increases durability.

The more moving parts you have, the more decisions you must get right.

Discipline beats drama

The biggest edge most investors have is not stock selection.

It is behaviour.

An ETF-based approach shifts the focus away from short-term noise and toward:

  • Consistently investing surplus cash
  • Progressing in your career
  • Spending less than you earn
  • Avoiding costly emotional decisions

You are no longer trying to outguess the next earnings update from a single company.

You are participating in the long-term growth of global capitalism.

Over decades, markets have rewarded patience and diversification. They have punished overconfidence and reactionary moves.

Staying in the game matters most

There is nothing wrong with owning a handful of high-conviction shares if you enjoy research and accept volatility.

However, if headlines about AI disruption, interest rates or geopolitics are causing sleepless nights, it may be worth reassessing your structure.

A low-cost, diversified ETF portfolio may not be exciting.

It may not produce brag-worthy weekly gains. Yet, it can help you stay invested through good times and bad.

And in investing, staying in the game is often the real superpower.

The post The sleep easy ETF portfolio to survive market crashes appeared first on The Motley Fool Australia.

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Motley Fool contributor Leigh Gant has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended WiseTech Global and iShares S&P 500 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Pro Medicus. The Motley Fool Australia has positions in and has recommended WiseTech Global. The Motley Fool Australia has recommended Pro Medicus and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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