When the market turns sour it will be largely irrelevant if you own a collection of individual stocks or a packaged mutual fund, which is of course just a larger collection of stocks (or other securities).
If anything, diversification is going to hurt you. The idiosyncratic risk of holding only a few stocks is going to be a lot higher than if you have a bunch. As such, the correlation to the market is going to be lower, thus potentially helping during market downturns
Depends on the diversification. If you hold uncorrelated bets, some may actually benefit from a global downturn
Honest question: what kind of investment, equity or otherwise, would pay out in the event of a global downturn? Besides gold, canned food, and guns/ammo of course. I can imagine some kind of “contra world economy” fund but could you suggest an example?
A bond fund might do okay. Or a distressed debt fund. But in general you wouldn’t want a fund with negative correlation to the market (since it’ll lose money all the time) but instead, one with low or zero correlation to the market. This is the idea of a market neutral fund: have zero market exposure so the return stream is completely uncorrelated.
A fund that makes money in the event of black swans can do quite well (i.e. 2001, 2008, 2020 (?))
It can lose money for months and/or years, but all it takes is one black swan to make all the money back and more.
Random trading with no fees should only give you slightly worse returns than an index fund. Gambling doesn’t usually have such positive returns.