Stock Market Crash? - 6 Things You Can Do to Prepare

Fight Off Your Nerves

There is always something out there to be worried about. Every decade has a crisis, but you can't let it give you the cold sweats. Today's market players are concerned with China, EU, North Korea, the crashing price of oil and the Trump Presidency.

Should this affect whether or not you should stay invested and stay the course? You should start by having a good handle on who you are as a person and as an investor.

Do you easily get panicked when hearing the news out of the talking heads on BNN or CNBC? Find a way to block it out and remind yourself that you're an investor and in this game for the long run.

You have taken positions in solid businesses that grow annually and pay dividends. There is no need to sell out on bad news but instead look for a way to profit and not become rattled.

Diversify

Have your investments spread out among a variety of businesses and industries. I don't have any idea what companies to buy in Europe or the U.S. so I buy an ETF that gives me exposure to that whole market. 

I buy strong cheaply priced companies, my downside is always going to be temporary and based on what the market gives me or takes away. 

Once you have the whole world covered off including, Europe, North America and Emerging Markets, when one is tanking the other is hopefully on the rise (not always). 

Oh sure, it has been my experience that all can come down together. If you own a little bit of everything you won't be easily panicked into selling. In fact just go for a walk and have confidence that all the bases are covered.

When everyone is selling in a panic, these are the exact points in time that the best sales in stocks present themselves. I'm convinced right now that February 2018 will in fact become known as one of those times.

Stick to The Plan

You should know why you're invested in the market. If the slightest bit of bad news bothers you, you should get out and revisit what you want to do to make a decent return on your capital without the stock market.

"If you can't handle 3-4% drops in the market 3-4 times a year then get out and go to cash" - Barry Schwartz

It might be a good idea for you to write down what you'd like to accomplish and try and stick to it. This is how I've learned to succeed in the market.

You must have a long term plan for investing success. Try as hell not to be blinded by what is happening in the short term because 80% of the time the equity markets are where the long term gains are made. You will miss out if you decide to sit out the ride.

Investors who panicked in 2008 never gained trust back or re-entered the market. They sold at precisely the WRONG time and most never returned.

Expect Consistent Returns

Markets go up and markets go down. What can you expect in the meantime? How much will my money make me over time?

Be realistic.

"Investors can expect returns in the 5-6% range going forward" -  Jack Bogle.

We should expect to earn at least that and maybe more if we stick to our knitting and not panic. 

If you keep looking at your portfolio every day you won't see that return because you'll be selling out most days and totally lose confidence in your plan.

Rebalance Your Portfolio

I only rebalance once a year at the beginning of the year. That's just what I like to do. When you have new money to add, you can rebalance which is perfectly alright and a good time to take advantage of buying while the market may be down.

Sell laggards when the markets are up, buy and rebalance when the market drops or goes on sale like the first quarter of 2018.

Check out quality companies like BCE, ENB, and EMA. In my opinion they are still on sale but you won't hear any analyst/portfolio manager recommend them at present. That's good for us!

Investments are the only asset I can think of that we buy when they're on the way up. We never take advantage of when they drop or go on sale. Think of going to the store and shopping for coffee, don't you like to buy it when it's on sale? Try and think of your stock purchases in the same way.

Do a Thorough Yearly Review

If you are a DIY investor like myself you need to take stock of where you stand at least once a year. Nobody will care about your money more than you do, so take care of it and take it seriously.

I don't spout personal financial advice but you need to have a realistic savings/investing plan in place and stick to it.

Stop listening to all the static about the markets coming from your TV. This is for entertainment purposes only. You can become a student of the markets just as easily by reading what the giants and masters have written over the course of time.

Save your money, write down what you're going to do with it and never sell out on a bit of bad news. Stick to these small points and you'll know how to profit when the market goes down.

How often do you rebalance your portfolio? Have you ever panicked and got out of the market completely? Do you have a plan written down somewhere that you review? I would love to hear from you. Please feel free to leave a comment or ask me a question in the box below.

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