Preparing for the Next Bear Market — Using, Not Avoiding, Regulated Investment Crowdfunding
How to Build Resilience Before the Storm Hits
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I’ve been reading 1929 by Andrew Ross Sorkin. The parallels between today’s high-flying markets and the late 1920s are unsettling.
Meanwhile, my friend Michael Shuman recently wrote about the economic storm he believes is forming on the horizon. He points to trade wars, a weakening dollar, potential Fed interference, stock market overvaluation, and technological job displacement.
We may quibble about timing, but serious thinkers are clearly concerned. I am too!
Michael offered great counsel to help communities prepare for the impact of a major recession. My goal today is to explain what I’m doing to prepare my portfolio for this possibility in hopes you may take something from it that will help you prepare.
One fact stands out:
The U.S. economy has not experienced an official recession since 2008–09.
That’s nearly 17 years. For those too young to appreciate this, there hasn’t been an economic expansion this long before in my lifetime!
More importantly for my world, Regulation Crowdfunding has never been tested by a true recession. The JOBS Act was signed in 2012. Reg CF went live in 2016. The pandemic contraction was sharp but immediately flooded with liquidity.
We do not have recession performance data for this asset class.
So how do we prepare?
Here is what I am doing personally—and why.
1. Increasing Cash (But Not Blindly)
I am increasing my cash position by trimming some public equity holdings—especially high flyers where I’ve already captured substantial gains.
Not all. Some.
Over long periods, markets perform well. A 22-year-old can likely ignore most of this discussion. They will live through several cycles.
But those in or near retirement do not have long recovery windows. A major drawdown at the wrong time can permanently impair lifetime income.
There is a risk here we must acknowledge clearly:
If trade wars intensify, the dollar weakens, and inflation re-accelerates, we could face stagflation—the most difficult economic environment of all.
In that case, cash loses purchasing power.
That argues for:
Short-duration instruments
High liquidity
Avoiding long-maturity bonds or multi-year CDs
Cash is not an investment thesis. It is a volatility-management tool and optionality reserve. It prevents forced selling and provides dry powder for opportunities that only appear when fear is widespread.
Think about cash this way:
If markets keep going up indefinitely, how much cash do you want? Not much, right? Your other investments will do better than cash so you’d regret having money outside the markets.
On the other hand, if the stock market drops 50 percent over the next 24 months before rebounding, how much cash would you like to have today? You’d want to have 100% of your investable assets in cash, so you could deploy that most profitably near the bottom of the market.
Here’s the reality. You can’t predict markets well enough to dare move all your money into cash now—but perhaps you can see why maybe you shouldn’t have all your assets tied up in the riskiest investments. Give some thought to your personal financial situation, your risk appetite, your age, your career trajectory—all the factors that influence your financial position in five years or fifteen. Then, decide if it doesn’t make sense to increase your cash positions today.
2. Shifting Toward Reg CF Debt (With Eyes Wide Open)
In my Regulation Crowdfunding portfolio, I am shifting further toward debt investments rather than equity.
Let me be clear: Reg CF debt is risky.
In a recession:
Default rates will rise.
Small businesses will struggle.
Climate projects may face capital or policy pressure.
Recovery rates are unpredictable.
Portals are not responsible for repayment of debt—or equity. They are conduits for capital and information. If a portal fails, that is separate from the issuer failing. However, administering a portfolio across multiple portals becomes more complex when one or more of them cease operation.
Investors must:
Diversify across issuers.
Diversify across portals.
Identify direct contact points with issuers outside the portal environment.
Preserve communication channels independent of the platform.
Now, why debt?
Because in a downturn, the asymmetry of risk can differ.
Reg CF equity investments made at optimistic valuations can easily suffer 100% capital loss in a recession. Equity sits last in line.
Debt, while far from safe, often:
Has defined payment schedules.
May continue paying for a period before stress appears.
Has contractual rights ahead of equity.
A 9–12% debt instrument that pays for 12 months before difficulty emerges may materially reduce net capital at risk compared to equity that collapses without ever paying a dime in dividends or achieving an exit.
This is not about guarantees. It is about relative resilience.
3. Intensifying Scrutiny and Diversification
This may be the most important step of all.
We have never seen how Reg CF performs during a prolonged recession.
No one can say: “Reg CF did well last time.” Or: “Reg CF performed poorly last time.”
There is no “last time.”
That means underwriting discipline matters more than ever.
In How to Make Money with Impact Crowdfunding, I devote chapters to:
Due diligence
Diversification
These principles are not theoretical. They are structural.
Scrutiny does not guarantee outcomes. But in a well-diversified portfolio, it meaningfully improves them.
Today, no one should commit capital without a structured due diligence process.
AI tools can help.
Our proprietary SuperImpactScore.ai tool reads and evaluates a Form C in minutes, flagging risks and surfacing issues that might take a human hours to uncover.
The Deep Research prompt tool I’ve created generates a detailed, 2,000-word due diligence framework that triggers a good AI bot like ChatGPT, Gemini or Clause to scrutinize offerings from top to bottom—impact and financials alike. It is available at no charge.
These tools do not replace human judgment. They enhance it. They process large volumes of information quickly and help prevent lazy analysis.
For paid subscribers, my Pick of the Week layers:
Multiple tiers of human review
AI analysis
Structured scoring
A clear recommendation
In a world where recession risk is rising and historical precedent is absent, layered scrutiny is absolutely essential. Layer your insights on mine and make even better investments.
4. Reg CF as a Component of a Defensive Strategy
I am not suggesting replacing public markets with Regulation Crowdfunding.
Public equities, over long periods, have built immense wealth.
I am suggesting:
Trim risk where valuations are stretched.
Increase liquidity.
Allocate thoughtfully to diversified, scrutinized private debt.
Preserve dry powder.
In the depths of recession—when capital is most scarce—the entrepreneurs who successfully raise capital are often the strongest. Historically, private investments made during recessions, with rigorous diligence, have produced compelling returns.
But that requires preparation.
It requires cash.
And it requires discipline before the storm, not during it.
As an aside, if you would like to move substantially all your investments into nontraditional assets, including Reg CF, I can recommend some great Registered Investment Advisors (RIA) who can guide you; don’t do it alone!
As Michael notes, we do not know whether this will be a Category 1 or Category 5 storm.
But we do know this:
Regulation Crowdfunding has never been tested in a true recession.
That fact alone should make every serious investor pause—and prepare.
Calmly. Thoughtfully. Intentionally.
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