One of the biggest mistakes investors make is forgetting to play defense.

We never know what’s going to happen in the market. There are no certainties, only probabilities.

But being dogmatic, whether bullish or bearish, is an expensive mistake.

You need to adjust to the market conditions:

→ When conditions are good, play offense and score points.

→ When conditions are bad, play defense and protect your goal.

This doesn’t mean going from 100% invested to 0% or even starting to short.

Instead, it’s about finding the right balance. Adjust your portfolio between aggressiveness and defensiveness, like a dimmer switch.

One of point I cannot stress enough is to be in sync with the market environment.

There are times to play defense and there are times to play offense.

But as I wrote last week, it became clear the markets were stretched. Market internals started to deteriorate. Risk outweighed reward.

It was time to play defense.

That’s why I reduced some exposure, took profits, and removed laggards.

From last week’s Market Update:

Markets never move in one direction forever. We haven’t seen a real correction in quite some time, and after such a long advance, a pause or pullback is both normal and healthy.

That time may be near. Even if it doesn’t turn into a major correction, volatility is likely to stay elevated for a while. That usually means large swings in both directions, with strong rallies followed by sharp drops. It’s an exhausting environment that often causes investors to second-guess themselves and make impulsive decisions.

Hence, these are the periods to avoid if possible.

It might be wise to take a few chips off the table, lock in some profits, reduce weaker positions, and reduce exposure.

This isn’t about perfectly timing the market. That’s impossible. It’s about managing risk.

De-risking the portfolio after a strong rally helps limit drawdowns, smooth out volatility, and be able to take advantage of new opportunities. Because momentum or growth names can easily drop 20%, 30%, or even 40% when the market corrects by just 5% to 8%.

Especially, the last sentence has been more accurate than I hoped for. Many of the most hyped are down just that much in less than a week. It’s a reminder that sentiment can shift fast, especially in high-beta names. That’s why it’s essential to stay flexible and wait for the right market environment.

And this is not a conducive market at the moment. Volatility is still elevated and risk appetite is low. The number of leading sectors and stocks is shrinking.

So, even if this isn’t the start of a bear market but just a normal correction, it can still be painful if you’re not prepared.

Right now, less is more.