Investing · South Africa
Could your portfolio survive a market crash?
A portfolio survives a crash when you can meet commitments, avoid a forced sale that breaks the plan and retain an appropriate investment strategy through the loss. A smaller percentage decline helps, but it is not the whole test. Examine the assets, the cash demands and any debt together, then decide what would actually have to change under stress.
Two households can own the same funds and face very different risks. One has secure income and no large near-term payments. The other needs portfolio withdrawals while its business income is falling. Calling both investors “moderate risk” obscures the difference that may determine who has to sell.
In this article
Define what failure would mean for you
Start with a consequence, not a market prediction. Would a large fall stop you paying a home-loan instalment, force the sale of a business asset, delay retirement or make you abandon investments you intended to hold for years? Each consequence has a different remedy.
There are also losses that patience may not repair. A default, a permanently damaged business or excessive leverage is different from a quoted price falling on an otherwise viable diversified holding. “Markets recover” is too broad a reason to retain every investment. The review should ask whether the original investment case and your ability to bear the risk remain intact.
Write down three figures before considering a reassuring historical chart: the rand loss you can absorb without changing essential plans, the cash required if income is disrupted, and the debt that remains payable regardless of asset prices. These figures need not produce a single neat risk score. Their purpose is to expose a conflict while you can still act deliberately.
Put a plausible bad combination through the whole balance sheet
Here is an invented R8 million financial portfolio. The shocks are chosen to test vulnerability; they are not forecasts, estimated probabilities or a recreation of a particular crash.
| Holding | Starting value | Assumed stress | Value after stress |
|---|---|---|---|
| Global shares | R4,000,000 | Foreign-market return −30%; rand per dollar rises 10% | R3,080,000 |
| South African shares | R1,200,000 | −35% | R780,000 |
| South African bonds | R1,600,000 | −12% | R1,408,000 |
| Accessible cash | R800,000 | Value unchanged | R800,000 |
| Illiquid private fund | R400,000 | Valuation reduced 50%; no redemption assumed | R200,000 |
| Total | R8,000,000 | Loss of R1,732,000, or 21.65% | R6,268,000 |
For global shares, the currency calculation is 70% × 110% = 77% of starting rand value. The weaker rand cushions part of the assumed foreign-market loss, leaving a 23% rand decline. It does not erase it. A different currency move could amplify the fall instead.
The bond line is deliberately allowed to lose value. A bond holding should not be treated as cash simply because it is usually described as defensive. As a concrete South African product example, Allan Gray describes its Bond Fund as carrying more capital risk than money-market or cash investments. That establishes the distinction; it does not predict this example's 12% loss or recommend that fund. Allan Gray Bond Fund.
The private fund's R200,000 is a stressed valuation, not money available to pay a bill. A holding can appear stable between valuation dates while remaining impossible to sell promptly. Keep a separate column for what can actually settle into the spending account by the required date.
Our table excludes the home and business. They still matter to the household: a business downturn could cause the income disruption modelled below. But adding their estimated values would not automatically create cash or make the financial portfolio's percentage loss smaller in any useful spending sense.
Test the cash requirement before rebalancing
Assume the household now expects twelve months of income to be R18,000 a month lower than its normal budget. It also has a committed R384,000 payment and wants a R120,000 contingency for other needs. These are separate, non-overlapping requirements.
| Cash requirement | Amount |
|---|---|
| Twelve-month income shortfall | R216,000 |
| Known payment | R384,000 |
| Contingency | R120,000 |
| Total cash reserved | R720,000 |
| Accessible cash currently held | R800,000 |
| Surplus above the requirement | R80,000 |
Before the fall, listed shares were 65% of financial assets. After the assumed shocks, they are worth R3.86 million, or about 61.6% of R6.268 million. Mechanically restoring the 65% weight would require buying R214,200 of shares.
If funded entirely from cash, that purchase leaves R585,800. The household would then be R134,200 short of its R720,000 requirement. The portfolio would look tidier against the old allocation target while the household became more exposed to a forced sale.
This does not mean rebalancing after a fall is wrong. It means the source of funding matters. An equity purchase of no more than R80,000 would preserve this particular cash requirement, before costs. Selling some bonds could fund more, but would change the remaining defensive assets and require a fresh review of the resulting allocation. Reducing or postponing a genuinely flexible payment might create room; relabelling a committed payment as flexible would not.
The sequence is therefore practical: confirm the cash commitments, verify what is accessible, reassess the appropriate risk level, then choose trades. An old target is an input to that decision, not permission to ignore new circumstances.
The assumed duration of the income loss deserves its own test. At six months, total reserved cash falls to R612,000, leaving R188,000 before any purchase. Even then, the full R214,200 rebalance exceeds the surplus by R26,200. At eighteen months, required cash rises to R828,000: the household is already R28,000 short before buying anything. In that case, debating the exact rebalancing date misses the prior need to fund the household. Keep the known payment and contingency unchanged in this comparison; only the income interruption varies.
What counts as accessible cash?
Identify the legal product and the withdrawal terms. A money-market unit trust is not a bank deposit. Allan Gray's disclosure for its own Money Market Fund explains that investor capital can be reduced if an issuer defaults and that excessive withdrawals can create liquidity constraints requiring managed or ring-fenced payments. Those are disclosed possibilities, not claims that such an event has occurred in the fund. Allan Gray Money Market Fund.
Bank deposits have a different protection framework. South Africa's Corporation for Deposit Insurance covers qualifying deposits up to R100,000 per qualifying depositor per bank, with eligible accounts aggregated at that bank. It is not a R100,000 allowance for every account number, nor a guarantee of all R800,000 in this example. Confirm that the depositor, bank and product qualify; amounts outside cover should not be assumed either fully recoverable or automatically lost. SARB CODI handbook, current member-bank information.
For planning, the cash schedule should show the institution, product, notice period, settlement process and authorised person. “R800,000 liquid” is only a useful assumption if those details support access when the payments fall due. A quoted redemption period and an emergency transfer tested in practice answer different questions.
Debt can make a tolerable asset fall intolerable
Consider a separate investment worth R1 million, financed with R600,000 of debt and R400,000 of your own capital. A 40% asset-price fall leaves R600,000 of assets against R600,000 of debt. Your equity is gone before interest, transaction costs or any additional liability. The asset lost 40%; your initial equity lost 100%.
Actual loan and collateral terms could require action earlier. Read the contract's valuation rights, collateral requirements, repayment dates and lender remedies rather than borrowing a margin percentage from another product or country. FINRA's explanation of margin calls describes the mechanism in the US securities context; it is useful background on forced selling, not a statement of South African contractual rights. FINRA: margin calls.
Also test apparently unconnected debt. A home loan may not trigger a securities margin call, but its instalment still competes for household cash if employment or business income falls. An undrawn credit facility is not interchangeable with cash already held unless you understand when access can be reduced or withdrawn.
ClearGauge's judgement: choose the action that preserves the plan
In the worked example, the headline 21.65% loss is not the most actionable finding. The important discovery is that a routine-looking rebalance would breach the household's cash requirement. The best next step depends on whether that requirement is firm and whether the old allocation still suits the household.
A useful stress review ends with decisions that can be explained in rand: retain this amount for dated payments; reduce this debt exposure; change this concentrated holding; accept this potential loss in the assets reserved for later years. It should also say what would justify selling after a fall, such as a broken investment case or a permanent change in spending needs. Otherwise “stay disciplined” can become an instruction to ignore evidence.
Avoid making a protective change whose purpose you cannot name. Selling everything may remove exposure to another immediate market fall while creating reinvestment and long-term spending risks. Buying because prices are lower may add more risk than the remaining cash flow can support. Neither decision becomes sound merely because it feels decisive.
Bring your adviser a consolidated list of assets and debt, the next year's committed payments and a description of how your income could change in the same stress. Ask for both the post-shock balance sheet and the funding schedule. If the proposed answer relies on selling an illiquid asset, a guaranteed rebound or unlimited bank credit, ask for a version that works without that assumption.
Common questions
How much should I assume markets will fall?
Use more than one scenario chosen around your exposures. The numbers above are illustrative, not a sufficient universal test. Include a combination in which the hoped-for diversifier does not help, then examine whether the consequence changes your decision. Severity without a cash-flow consequence is an incomplete exercise.
Does holding more funds make the portfolio crash-proof?
Several funds can own the same securities or respond to the same economic shock. Count underlying exposures and include your income and business risks. The detailed ownership test belongs in how many shares make a diversified portfolio.
Should I hold enough cash to wait for a full recovery?
No one can know that waiting period in advance. Size cash around commitments and an explicit review rule, then test the cost of holding it. The offshore retirement withdrawal example shows why a reserve can help on a recovery path without improving total wealth on every path.
Sources and calculation basis
Sources were checked on 6 September 2026. Provider disclosures describe the named products, not all funds or a recommendation. CODI cover depends on eligibility; the margin source concerns US securities accounts and supplies no South African loan terms. All portfolio values, shocks, cash requirements and debt figures are invented. The worked examples above show the starting and stressed assets, the rebalancing amount and the cash gaps. There is no recovery forecast, probability estimate or separate tax/transaction-cost model. Apply the test to actual circumstances with appropriately qualified advice.