portfolio resilience
Case studies on building a resilient portfolio for uncertain times
Every investor is unique—and so are their goals. Three client cases show resilient portfolios tailored to match each situation.
Madison Faller, Global Investment Strategist
Sam Zief, Global Macro Strategist & Head of Global FX Strategy
Harry Downie, Global Investment Strategist
Andrew VanWazer, Head of U.S. Wealth Management, Portfolio Advisory Group
Published April 29, 2025
A resilient portfolio means being prepared for life's changes, shifts in the economy and, of course, market volatility. Resilience means readiness for the uncertainties that can arise, while keeping your long-term financial goals in focus.
This year’s market turbulence highlights the power of diversification A global multi-asset portfolio can be a strong anchor during these uncertain times. At the heart of crafting a thoughtful investment strategy is the big question: What do you want your money to do for you?
These three clients’ experiences illustrate how intentionally aligning your portfolio with your long-term goals prepare you for any market environment.
Case Study one
An executive contemplates his concentrated stock
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When a large stake in a single position—whether that is a stock, sector, geographic region or real estate—dominates your wealth, it can expose your portfolio to increased market volatility. For some, this vulnerability can be painfully evident during broad market fluctuations, or industry evolution and creative destruction. Any of these could jeopardize achieving your financial goals.
History suggests the risk of investing in a losing company are high: Over close to 45 years of market performance, almost half of all publicly traded U.S. companies have suffered a catastrophic loss in value.1
The good news is that we can utilize a range of strategies to manage concentrated positions, helping our clients de-risk and diversify. Many opt to retool using a mix of smart, tailored approaches incorporating their investment views, financial goals and tax and legal considerations.
The executive’s challenge
Gabriel, a widower with two adult children, just retired from his longtime role as a senior executive at a listed pharmaceutical firm. He has much of his wealth in company stock. In one volatile week, its value plunged from EUR50 million to EUR30 million. Yet Gabriel is hesitant to sell his shares outright.
While he’s no longer tied up by his former company’s insider policies on employees selling their stock, selling could trigger potential capital gains taxes. Additionally, he wants to pass on his wealth to his children and future generations, hoping to retain the potential for the shares to appreciate further.
Gabriel and his banker evaluated how diversification could benefit him by stress-testing his existing portfolio under different scenarios. The results highlighted that his portfolio’s concentration produced a wide dispersion of possible outcomes—a range Gabriel found unsettling. Overall, the aim was to build a more resilient, diversified portfolio.
Exploring the toolkit: Borrow, hedge, monetize and/or give?
Gabriel and his banker considered several strategies:
- Borrowing against his concentrated stock holding could offer liquidity and flexibility. And by retaining his company stock, he would participate in any future upside.
- Hedging the position with options or structures could mitigate volatility and fine-tune the amount of downside exposure he’s comfortable with, and without selling the position, the strategy would also allow for potential future appreciation.
- Monetizing, using a combination of hedging and borrowing strategies, which would let him access the value of some (or all) of his stock position and generate liquidity upfront. Again, this happens without selling, maintaining the potential for appreciation.
- Gifting and charitable giving strategies, while navigating his complex tax considerations.
Gabriel’s approach: Monetizing for flexibility and diversification
Since Gabriel wants to keep his shares and is mindful of tax considerations, he decides to monetize their value to get cash now. A common way to do this is with a variable prepaid forward (VPF), also known as a funded collar in some jurisdictions, which blends borrowing and hedging strategies. He receives a cash advance in exchange for agreeing to transfer the shares (or their cash equivalent) in the future to repay the borrowed amount.
With this newfound liquidity (pre-tax) in hand, Gabriel is able to invest in a diversified portfolio, reducing the risk of his overall holdings, and helping smooth the ride of any volatility while he still holds his concentrated position.
When the monetization strategy expires, Gabriel can repay the cash advance with his shares or their cash equivalent, no matter their current price—which offers a built-in hedge against a stock decline. In the future, Gabriel and his banker will consider other strategies for his remaining shares to continue building portfolio resiliency, keeping him prepared for life's uncertainties so he can reach his long-term financial objectives.
Ready to discuss building portfolio resiliency?
Case Study two
A retiree is uneasy about market volatility
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2025 has seen a lot of volatility, amid mounting worries about tariffs and their impact on the economy. Major market swings can be unnerving. These are the times investors want assurance that their portfolios can withstand uncertainty.
Assets beyond traditional stocks and bonds can help reduce portfolio risk. For instance, gold has been a powerful support during times of uncertainty and geopolitical flashpoints. Structured products can manage risk by cushioning against losses while keeping the door open for future gains. And hedge funds can skillfully navigate market moves. Such investment vehicles may offer income and the potential to move in different directions—uncorrelated—from publicly traded stocks and bonds.
The retiree’s challenge
Louis, a 70-year-old retiree with a financial services career background, worries that his 60/40 stock-bond portfolio isn't prepared for a variety of market risks. He’s concerned about stock market swings and that inflation could spike on all the tariff news, which would be difficult for bonds. He remembers when 2022 saw stocks and bonds both selloff in tandem.
To better insulate his portfolio, he wants to incorporate a third lever outside of stocks and bonds, one meant to improve its Sharpe ratio—more return for the risk he’s taking (or the same return with less risk).
Exploring the toolkit of less-correlated assets
Louis’s banker explained several ideas:
- Add about a 5% allocation to gold: A long-term diversifier with low correlation to other asset classes, gold can enhance portfolio resilience, especially during times of stock declines or heightened geopolitical tension (as shown in chart).
During past periods of market turbulence, gold has helped smooth volatility, as investors often view it as a safe haven asset. In recent years, gold has also gained structural support, with central banks holding 20% of their FX reserves in gold and demand expected to grow. He could fund this by taking a little from equities and fixed income.
Gold has protected during big equity drawdowns, but it wasn't always smooth ride
Performance in 5 largest equity drawdowns since 12/31/1975
*US Agg data before 1988 is based on monthly returns. Source: Bloomberg Finance L.P. as of 1/31/25.
- Evaluate a diversified set of macro hedge funds (about a 10% allocation): Macro hedge fund managers look to invest based on the major global trends—predicting policy changes, interest rates, FX trends and other salient factors.
Historically, they've improved returns during crises like the credit crunch, dot-com bubble burst and pandemic sell-off, suggesting such strategies can be helpful in diversifying against broad public market risks. Macro hedge funds’ three-year returns were about 4% annually as of April 1; hedge funds overall have returned close to 6% annually.2 He could fund the allocation from fixed income.
- Structured products: These tools are designed to offer asymmetric returns—for instance, providing a buffer against losses while still allowing for exposure to potential gains. By combining derivatives with traditional securities, structured products can be tailored to meet Louis’s specific investment needs, helping to manage risk and still capture growth opportunities. Louis's banker suggested an allocation of up to 15%.
- Evaluate the type of equities in his portfolio: A portfolio constructed in recent years (and even up to 10 years ago) and not rebalanced will have become heavily tilted toward growth companies in the U.S. That may need rebalancing, to include more value stocks and other regions’ equities.
The latest market downturn has been led by growth stocks. As a result, owners of portfolios that have not been rebalanced may feel the recent volatility more intensely.
Louis’s approach: Getting active with gold and structures
While Louis considered all the options, he favors gold’s benefits and likes its long history as a diversifier. He also chooses structured products for their tailored exposure. All these investment vehicles will need ongoing maintenance, since the market is ever-changing. This works as Louis wants to stay actively involved.
Case Study three
Selling her business leaves a founder in cash
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Liquidity events, for instance selling a business or receiving an inheritance, are exciting opportunities. But too much cash also brings complexity—and comes with an opportunity cost.
Remaining in cash would allow inflation to erode its value and leave your wealth vulnerable to central bank rate cuts that lower short-term yields, while also foregoing bonds’ income stream.
The founder’s challenge
Maria, 56, recently sold her software development company for EUR50 million. She and her partner now face the prospect of investing the influx of cash, after having just a mutual fund portfolio they constructed themselves previously. As they scale back from work, they plan to renovate their home, buy a beach house, and spend more time with their three adult children and first grandchild.
Preserving their wealth is a top priority, both for now and to leave something for future generations.
Maria knows they need to invest to reach their long-term goals, but with the market so volatile, it feels risky. She worries about losing money when it seems safer to keep their cash in the bank.
Exploring the toolkit: Aligning investments with goals
Maria’s banker helped identify their risk tolerance—moderate, in between conservative and aggressive. They also talked through diversifying beyond tech; a preference for funding their lifestyle using investment income, rather than spending down cash reserves and an openness towards taking advantage of tactical and thematic investment opportunities as they arise.
He recommended:
- Create a goals-based plan that segments assets into four “buckets”—liquidity (cash), lifestyle needs (income), growth (for sustaining wealth in perpetuity) and legacy (for passing on to family or charity), and determining the appropriate amount for each.
- Choosing a timeline—phasing in or all at once: Given market volatility, a gradual phase-in can help manage timing risk and support the couple in maintaining investing discipline.
- Building a strong, resilient core portfolio: Considering their medium risk tolerance, a balanced allocation that aims for the middle ground between capital preservation and appreciation, seems most suitable. Their strategic asset allocation: 35% fixed income and cash; 55% equities and 10% alternatives, a mix of income generating and growth assets. The portfolio can also be designed to be aware of any tax implications.
- Considering tactical opportunities: The cash opens the door to identifying emerging shorter-term opportunities in trends and areas of interest they can invest in through individual portfolios, mutual funds, ETFs or alternative investments.
Maria’s approach: The full toolkit
Maria and her partner decide to move forward with their banker’s comprehensive plan. Stress-testing the portfolio gives them the reassurance that they would be prepared for various market scenarios.
There is a natural progression from wealth creation to its preservation and growth. Thoughtfully diversifying your holdings is an important part of a holistic plan for your wealth. To start building portfolio resilience tailored toward your specific needs, speak with your J.P. Morgan team.
More ways to build a resilient portfolio
Building a resilient portfolio
Ways to strengthen a portfolio—especially for unpredictable markets
5 key strategies to fortify portfolios
DEFINITIONS
Sharpe Ratio: The Sharpe Ratio is a financial metric used to evaluate the risk-adjusted return of an investment or portfolio. The Sharpe Ratio is calculated by taking the difference between the return of the investment and the risk-free rate, and then dividing that difference by the standard deviation of the investment's excess return.
S&P 500 Index: The S&P 500 Index, or Standard & Poor's 500 Index, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices and is considered a benchmark for the overall performance of the U.S. stock market.
Russell 3000 Index: The Russell 3000 Index is a capitalization-weighted stock market index that seeks to be a benchmark of the entire U.S. stock market.
HFRXM Index: The HFRX Indices utilize a rigorous quantitative selection process to represent the larger hedge fund universe.
1The analysis was performed for Russell 3000 Index companies from 1980–2023. Here, we define catastrophic as a 70% peak-to-trough decline in value that hasn't recovered. In addition, two-thirds of publicly traded U.S. companies have underperformed the index. Jacob Manoukian and Kenneth Datta, “The Agony & the Ecstasy,” J.P. Morgan Private Bank, October 3, 2024. https://privatebank.jpmorgan.com/nam/en/insights/markets-and-investing/ideas-and-insights/the-agony-the-ecstasy
2HFRXM Index for Macro Hedge Funds. HFRXGL Index for global hedge funds. Source: Bloomberg Finance L.P. Data as of April 1, 2025.
Important Information
