The Surprising Way Some Portfolios Handle Market Drops

Why Playing Defense in Investing Matters

Market crashes aren’t just history lessons—they’re gut punches for anyone with real money invested. If you’ve ever lost sleep during a downturn, you know the feeling: panic, second-guessing, and that sinking fear of “what if it all disappears?” The truth is, you don’t need to invest with fear. You just need the right strategy.

I’m David Warshaw, CFP® with The WealthPlan LLC, and today I want to show you exactly how to invest confidently—even in a crash. We’ll cover my Diversified Income Strategy and my WealthPlan Armor Strategy, two real-world approaches I use with clients to balance income, growth, and protection.

Stick with me, because by the end, you’ll see why new tools like Defined Outcome ETFs are changing the game and giving investors a shield against losses.

Offense Wins Games, Defense Wins Portfolios

Investing isn’t just about offense—it’s about defense. Anyone can buy into the market during a bull run, but not everyone knows how to keep their wealth intact when volatility hits.

That’s why I’ve built satellite strategies—designed not to chase the next shiny stock, but to provide income and armor when markets stumble. Think of them as the reliable sidekicks that protect the hero of your portfolio: your core investments.

 

The Diversified Income Strategy

Cash Flow First, Growth Second

What if your portfolio could pay you consistently while still leaving room for long-term growth? That’s the premise behind my Diversified Income Strategy.

This portfolio is built to prioritize income. We’re talking dividends, interest from fixed income, and option-writing strategies that generate cash flow. Growth comes second, but it’s still in the mix—through equities and momentum-driven stocks.

The secret sauce? Nine exchange-traded funds (ETFs) covering roughly 1,688 securities. That means instant diversification across U.S. and international dividend players, preferred stocks, treasuries, and high-yield bonds. It’s like building a paycheck machine inside your investment account.

How Income Smooths Out Flat Markets

What happens if markets stagnate for years? For many investors, that’s a nightmare. But with an income-driven strategy, you’re still collecting dividends and interest. Even if prices don’t climb, your portfolio works for you every month.

That’s why retirees and income-focused investors love this approach. It doesn’t guarantee you’ll never lose money, but it smooths out the ride with predictable cash flow. Think of it as a financial cushion for when growth slows down.

 

Introducing WealthPlan Armor

What Makes This Strategy Different

Now let’s talk about fear. What if you could stay in the market but protect yourself from big losses? That’s the idea behind my WealthPlan Armor Strategy.

This approach is built for wealthier clients who care more about protecting what they’ve built than swinging for the fences. It’s portfolio defense at its finest. And the secret weapon? Defined Outcome ETFs—also called buffer ETFs.

Defined Outcome ETFs Explained

Traditional ETFs track an index, like the S&P 500. Simple enough. But Defined Outcome ETFs take it further: they use options to reshape returns around specific goals.

Here’s how it works: if you buy a buffer ETF with a 15% buffer and the market drops 10%, you lose nothing. The buffer absorbs it. If the market drops 20%, you only lose the portion beyond the buffer—5%.[1]

Some products even offer a 100% buffer, limiting losses to as little as 1–3%, even in a worst-case crash. Imagine sleeping at night knowing your downside is capped while your upside is still in play.[2]

Why Investors Are Paying Attention

Since their launch in 2018, these ETFs have exploded in popularity. By mid-2025, the space has grown to $60–70 billion in assets, with Innovator ETFs leading the pack at $27 billion.[3] Big players like BlackRock, Goldman Sachs, and Allianz are also in the mix.

Investors love them because they offer:

• Liquidity – Tradeable during market hours.
• Transparency – Daily disclosure of holdings.
• Flexibility – Choose your reference index and buffer level.
• Accessibility – Available in regular brokerage accounts and IRAs.
• Psychological peace of mind – Knowing you’re protected helps you stay invested.

 

 

The Tradeoffs of Portfolio Armor

Capped Upside vs. Peace of Mind

But nothing in investing is free. Defined Outcome ETFs come with tradeoffs:

• • Capped Upside – If the S&P 500 rallies 20% but your cap is 11%, you’re leaving gains on the table.[2]

• • Higher Fees – Expense ratios run 0.5–1%, higher than plain-vanilla ETFs.[4]

• • Timing Risk – Buy or sell mid-cycle and your protection may shift.

• • Complexity – You need to understand how each product is structured.

In other words, these ETFs are shields, not magic. They protect you in crashes but limit you in booms.

Real Numbers in Action

100% Buffer Example

One fund capped gains at 6.49%, with a downside limit of just 0.79%. For investors who value sleep at night, that’s a powerful tradeoff.[5]

15% Buffer Example

Another buffer ETF capped gains at 11.46% but left you exposed beyond 15%. That means you enjoy higher upside, but you take more of the hit if markets fall hard.[6]

Different tools for different goals. Conservative investors often prefer 100% protection, while others accept limited downside for higher upside potential.

 

The Psychology of Staying Invested

How Protection Keeps Investors Calm

The greatest benefit of these strategies isn’t just numbers—it’s behavior. Fear of losses is what makes investors sell at the worst times. By capping losses, buffer ETFs give people the confidence to stay invested, which is the single most important driver of long-term success.

Why Staying Invested Matters Most

That’s why I call this strategy “armor.” It’s not about beating the market—it’s about helping you stay in the fight.

Final Thoughts: Investing Without Fear of the Crash

You don’t need to live in fear of the next crash. By using strategies like diversified income portfolios and defined outcome ETFs, you can protect your wealth, generate income, and keep investing confidently.

Markets will always rise and fall. But your financial plan shouldn’t.

So here’s your action step: talk to your advisor—or talk to me—about how income strategies and buffer ETFs can fit into your portfolio. Don’t wait for the next downturn to realize you needed armor.