Last September 29, 2008, the largest one-day crash happened to the Dow Jones Industrial when they plunged and lost 777.68 points or 6.98% after the US House of Representatives rejected a $700 billion bank bailout plan by the government. This fiasco cost $1.2 trillion, bringing down with it thousands of traders bankrupt and investors at a deficit. Can you imagine if you were one of those people that had taken a risk and then just like a bubble, all your wealth pops and disappears? Then worry not because we will discuss ways to survive in case the very thing happens to you. Here are three ways to be okay even after a stock market crash.
1. Avoid the Stock Market All Together
There is a saying that goes, “Prevention is better than cure.” This is true in aspects other than health. The only better than surviving a stock market crash is avoiding it all together. However, be warned, that because you aren’t risking anything, you aren’t gaining anything either. Avoiding the stock market all together when you don’t know if a crash will happen will, of course, effectively cut your chances of profiting all together. That’s why this suggestion is only effective for the senior traders who have already reached their prime.
2. Diversify. Diversify. Diversify.
We can’t stress it enough. Diversifying is one of the best things that you can do for your portfolio. Depending all your profit in one source of income namely the stock market, will expose you to bigger risk. That’s why to balance the risky business of dealing with stocks and equities, you should bet your money also on investments that have a more constant stream of revenue albeit lower. You can invest in ETFs, bonds, and gold.
3. Stick Your Money in A Savings Account
Sometimes, it’s best to stick with tradition. It has been tried and tested by time after all. Get a savings account for a portion of your wealth to ensure that no matter what happens, you will have something left over that will keep you afloat. The thing about savings account so that it won’t be idle money is to get one that is legal, insured and high-yielding. Do your research and find a bank that is insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration to protect your money from any unexpected factors and to make sure it’s insured and legal. After that try to find one that is also high-yielding. Nowadays, banking has become much more competitive and you can definitely find banks that offer this kind of savings account by browsing online. Admittedly, this will dramatically decrease your revenue but at least your money is definitely safe.
These three ways are great ways of hedging the effects of a stock market crash. However, be reminded there are no absolute sure ways of predicting and avoiding a stock market crash. That’s why the next best thing for you to do is prepare for them.