Investors of the blue-chip stocks are making tremendous profits, smiling their way to the bank. Everything seems okay, the party is at peak until the benchmark index hits a 35,000 milestone. This lures more investors to join the party for the quick buck. But what if all of a sudden, the market comes tumbling down? That’s a situation you don’t want to think about.
Below is a survival guideline just in case of a market crash.
First and foremost, avoid hitting the panic button. You will be tempted to sell out. Stay calm and take the fall as an advantage. The saying goes what goes up will eventually come down’ and so does the markets. The markets are cyclical in nature and rising and falling is a normal experience. The only problem is to be caught off guard.
Long term investors should take a market crash as an advantage to take the cost of acquisition of stocks down, a strategy known as the rupee cost averaging. This ensures that you make bigger profits once the market rises again.
The falling market also offers the opportunity to buy value stocks since in the bear market the value of good companies is incredibly beaten down by the junk stocks in the collapsing market.
Non-cyclical stocks are also a good opportunity. You can purchase this stocks from companies whose business are not cyclical in nature. Companies dealing with gas and food since their demand will keep on rising regardless of the changing market cycle.
Playing dead is also a wise tactic. A bear market is like a jungle. When you encounter a huge bear in the jungle, you can play dead till the bear goes away. In the market, it means putting your money in form of debt instruments, debentures, it could be in form of bonds or even as government deposits until the market relapses high again.
Mitigating the risk of equity exposure is done through diversifying the portfolio of investments by spreading the equity to be in form of other assets such as debt and real estates. This form of allocation will help to reduce the financial impact of the market crash.
It is a type of IRA that allows an investor to own physical gold, platinum, silver etc. in place of paper based assets such as cash and bonds. Enrolling for gold IRAs can be a great form of alternative investments for a crashing market. Consult a financial advisor to explain how the system works in a detailed manner.
An economic collapse is real. It has happened before, and it will happen again! It can be tragic with far reaching consequences and should be taken seriously. Its time you put up your game plan before it’s too late.