Headlines that talk about volatile markets are pretty common nowadays, and with the advent of technology, there are stock market warnings everywhere. These experts who predict market crashes have been predicting it every month for several years, but the truth is, no one can guess market crashes correctly year after year. It does not resemble any form of consistency because of its volatile nature.
The stock market is like a cycle and if it is going down, then it will go up at some point of time in the relative future.
What you can do to make sure that you still get the maximum returns from your investments is to take precautions and chalk out a strategy that will help you sail through rough waters.
There are safe options like selling all your stock and putting it in the most liquid form, cash, but that will not earn you any money.
There are various ways in which you can keep your head afloat, from options trading to leveraged inverse funds that go up when the stock market is down. You can go about this using a large number of strategies but at the end of the day you have to make sure that it is profitable for you.
Here are the 4 Steps that you should consider taking before there is any type of a market crash:
Understanding the Time
If you had invested in a stock long time back to meet a goal and if you anticipate a crash that might happen in the near future, you should immediately sell those stocks and convert them to cash. You can use the money to buy short terms funds or park the cash in short term deposits.
Allocation of Investments
In an unstable market, it is best to lock in investment values by investing money in stable bond markets. A nice trick would be to use your age for the percentage of allocation. Assuming that you will live a normal lifespan, then you will have time to recover all losses and your bond investments will be high and dry.
Sell High, Buy Low
An old advice, but definitely gold is to buy stocks low and sell high. Now, blue chip stocks are getting more attention because of their soaring prices, and you should indulge yourself in measured buys when they are cheap so that you can again sell them in a measured way when their prices rise.
Buy When things are Bleak
Be ready to buy new stocks when prices are low. It is a bit risky, buying stocks when the market is in shambles, but you might gain a lot if you do so. If you have the cash to buy such stocks, you should, even more if you are in the market for the long haul. These stocks will definitely rise in the long term, and if you wait it out, you will surely see the returns.
If you can rebalance correctly, you will be able to sell your stocks throughout the year and use the capital gains to reinvest in stocks that will be relatively cheaper.