How I’d Invest $100k During This Market Drawdown

I’ve recently received this question from a Steady Compounding Insider Stocks member:

First off, I’m jealous. A portfolio with mostly cash as we enter a market drawdown? Yums.

But more importantly, I love this question because it reveals some common misconceptions that could lead to expensive mistakes.

Listen, understanding how to deploy cash during market turbulence is one of the most valuable skills you can develop as an investor. Let me share my thoughts as we navigate this volatile period.

Two Very Different Types of Drawdowns

There are two distinct types of drawdowns that smart investors need to understand:

1. Business-Specific Drawdowns

This happens when a specific company hits roadblocks. Like Lululemon with its innovation and inventory problems that sent the stock tumbling.

The opportunity here comes from having differentiated insights. If the market believes a business is permanently impaired, valuations crater. But if it’s just a temporary hiccup? That’s where prepared investors can find gold.

I spend most of my “peacetime” hunting for these opportunities. Sometimes I’m right, sometimes wrong. But if I’m right about 6 out of 10 picks, I can generate excellent returns for my efforts.

2. Broad Market Drawdowns ← We are here now

This is when markets sell off indiscriminately regardless of business performance.

Think 2008 financial crisis, the pandemic meltdown, or the inflation fears of 2022. These are defining moments for investors, because this is when great businesses get thrown out with the bathwater, and wealth transfers in a significant way from those who panic to those who keep their shit together.

And here’s the crucial insight: During broad market drawdowns, I don’t chase optically “cheap” stocks.

If I had $100k in cash right now, I would focus exclusively on the highest quality businesses at reasonable prices. Not the cheapest stocks, but the best businesses.

These are precisely the companies that will: 

✅ Weather the current storm with their strong balance sheets 

✅ Recover fastest when sentiment improves 

✅ Compound your wealth for many years afterward

My Exclusive Drawdown Shopping List

Late last year when I mentioned selling stocks to raise cash, I issued an exclusive report on what I was selling to Insider Stocks members.

This time, I’ll be issuing a detailed report on precisely which stocks I would buy if I were sitting in this reader’s position—largely cash.

Here’s a hint: It won’t be just two stocks. That’s way too risky for me (and for anyone).

I’ll also cover portfolio construction and risk management principles, because any discussion about capital allocation is dangerously incomplete without addressing how to protect your downside.

This exclusive “Market Drawdown Shopping List” report will be published this Friday, 11 April, available only to Steady Compounding Insider Stocks members.

If you like access to this list, along with all my research archive, click here to join Steady Compounding Insider Stocks.

I’ll see you inside,

Thomas