A stock market crash is just like a Tsunami in the market, it suddenly creates a decline in stock prices across the sectors of the stock market, resulting in a significant loss of paper wealth. A stock market crash may occur in the specific country, region or across the globe on the reason of geopolitical issues, economic instability, wars, large corporate hacks, changes in federal laws and regulations.
Whatever may be the reason the effect of the stock market crash sometimes followed by depression if it last longer. It has been observed that whenever the stock market crash happened the market was on the peak. A stock market crash can correct 25-30 percent in the market in a few straight session.
It becomes very difficult for investors/traders to remain calm after losing a substantial portion of their capital invested in the market at the time of depression. Normally investors press the panic button and lose their money. Some traders/investors are also seen committing suicide after the stock market crash especially those who are trading without stop loss and take extra leverages in the trading.
Many of us must have seen the 2008 stock market crash, the Indian stock market was working all-time high prior to the crush. Many traders/investors lost their hard-earned money some of them didn’t turn back into the market after that. The stock market crash in 2008 wiped out many investors and traders from the market.
Do you know that you can protect your portfolio and even make money from the stock market crash?
Yes, you can to save your portfolio and make money during the stock market crash you need to follow the below points.The Anticipation of the Stock Market Crash:
It is not easy to anticipate a stock market crash, but you can always be careful or alert when the market is at peak or on top. Market always downturn from the peak it may be either a small crash or a big stock market crash. It always hampers your portfolio and gives you the threat of losing hard-earned money.
You should always put a stop loss of your trade or investment particularly when the market is on the peak.
Hold Cash :
Investors or traders should be always alert and preferable not to invest when the stock market is on the top levels. It is advised that you should sit on cash waiting for an investment opportunity after correction or crash.
We often realized that when the market comes down, we are not able to take advantage of buying opportunity because of running short of money. So we should always hold some investable money to take these kinds of opportunity in the future.
Make a List of Stock:
You should make a list of fundamental strong stock the front line stocks which decline fast always recovers fast. So your list should be Nifty 50 aggressive and fundamentally strong stocks like RIL, L&T, TCS, HDFC, HUL, etc
You need to track those stocks and whenever you get any buying opportunity to say the decline of above 15-20 percent one should start accumulating in 3 to 4 phase. You never know when the falling would bottom out that is why it is advisable to buy on phases.
Don’t Sell on Panic
It is usual that whenever there is a stock market crash, investors or traders press the panic button and sell their portfolio to save hard-earned money. This thinking is wrong, as the great Warren Buffett has rightly said … “you need to Zigg when other’s Zagg!.” It means when other people sell their shares on panic, be there to invest instead.
Selling your portfolio on panic can wipe out 50 to 60 percent of your capital invested rather you should stay invested and keep calm. You should not be influenced by others known that in a big market crash you will losing your 25-30 percent of your portfolio.
Don’t Get Influenced by Others:
To keep calm and to continue with your existing portfolio it is very important not to get influenced by others. You should not listen to others, you never know it may be a rumor. You should not also get influenced by social media or any other financial media
The financial media is always looking for stories to hype up. That’s how they make their money. In reality, the financial media isn’t really concerned with your wallet or financial health. You should tune out the financial media when the stock market crashes.
Make a Safe portfolio:
You can also make a recession-proof portfolio. During the recession people usually cut their luxury item from their budget like going to movies, buying new clothes, holiday trip, expensive restaurant. Sales of auto and other luxury items get a decline when there is a recession.
Whereas the pharma stocks, FMCG stocks are known as recession-proof stock. But that doesn't mean when there is a recession or stock market crash these stock will never fall. These will also fall but would fall less than the luxury stocks.
Whereas the pharma stocks, FMCG stocks are known as recession-proof stock. But that doesn't mean when there is a recession or stock market crash these stock will never fall. These will also fall but would fall less than the luxury stocks.
Conclusions:
To conclude you should prepare yourself mentally that stock market crash may come at any time particularly when the market is at peak. During that time you must have some cash on hand so that you can invest in fundamentally sound stock in correction at an attractive price.
You should keep calm knowing that your existing portfolio may fall maximum 25-30 percent. If your portfolio is in a great combination of good fundamentally aggressive and recession-proof stocks it would definitely recover your portfolio fast.
You should keep calm knowing that your existing portfolio may fall maximum 25-30 percent. If your portfolio is in a great combination of good fundamentally aggressive and recession-proof stocks it would definitely recover your portfolio fast.
It is also important that you should not get influenced by any financial/social media or any person during the time of the stock market crash. Most of the media houses during that time misguide and unnecessarily creates panic to increase their channels TRP. You should always stand by on your own decision.
You may also like to read Best Stock Investing Strategy| Earn Money from Stock Market
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Happy Investing!!!
Finogyan Team
If you like the article, please share it with others.
Happy Investing!!!
Finogyan Team
