By Guy Avtalyon
The stock market is plunging but will it crash or not is still unknown. It isn’t easy to predict the stock market crash because it occurs suddenly. The point is to be prepared for such a scenario and here are several ways on how to do so.
I don’t want to frighten you, but we have to talk about the stock market plunging.
The volatility of the markets is back again. Actually, the market is plunging. That is the data from the first six days in October. The S&P 500 has dropped a total of 83 points. Now it is almost 115 points lower than in September. Having this in mind, the trade war and the inverted yield curve, also, let us know how not to speak about a recession.
The stock market is plunging
These gaps are standard. For the last 70 years, there were 37 corrections in the S&P 500. If our counting is good that is almost every second year. And mentioned drops were about 10%. Now, we have 5% and such were more common in history.
This is the price we have to pay for long-term wealth making. So, you must understand that long-term investors have an advantage against the short-term since they would infrequently experience continuing damage from stock market corrections. Time and patience, wait for a bull market rally. It will nullify the correction in the stock market. Anyway, the point of long-term investing is to buy and hold. Hold on to your stocks, that is the key to winning in the long run.
I warned you how difficult this year can be. But when investors’ fears overwhelm the market and the stock market is plunging, there is still something you can do.
Is a safe-haven stock right move?
Yes, you can thrive during the stock market correction if you buy safe-haven stocks. For example, buy gold. The gold is a store of value, so it is a safe-haven asset.
The truth is that you will not gain a lot of profit by holding gold for a long time. It is a physical commodity, there is no dividends. So think about buying a stake of shares in some companies that produce the jewelry or anything of gold instead. Also, a good choice is to buy shares of mining. This is also a suitable alternative when the stock market is plunging and getting lower.
Stocks with low volatility
Companies that provide constant profits, pay a dividend, and have low volatility can be very beneficial when the course in the market turns. Some of them will give you yield much bigger than the yield of a 10-year Treasury bond, for example. Find some company with the old fashioned model of business. Yes, it can be boring but in the long run, it is excellent. The point is to survive the market plunging.
Basic goods and utilities as a safe investment
Buying stocks of some companies that produce cleanser or hygiene is an excellent choice. People will always need to be clean and they will buy these products no matter how deep the crisis is. Also, stocks of energy companies. They are not low-cost but they are eternal. Even more, these defensive basic-need stock can grow in a volatile market.
What to do when the stock market is plunging?
Many things in the markets depend on risk tolerance. Your investment portfolio is based on risk tolerance. The main problem with the stock market plunging and when it crashes is that they are coming suddenly, no one can be sure that the crash will come and when, or the market will recover. Market crashes happen quickly, there is no warning. The problem with investors’ risk tolerance is that is very hard to adjust it depending on circumstances, especially during the bear market. You’ll be emotional, panicked, you will be encompassed by fears. To avoid all of these, take care of your portfolio structure. You should hold liquid assets, such as cash, bonds. When the market crash occurs you need a through-out scenario to avoid losses. Liquide commodities will provide you that.
Being an investor means you have to put your feelings away. You have to make your decisions separate from them.
Investing is magnificent. But life is also.
During the bear markets, even trivial corrections can be remarkably dangerous. But at the same time, bear markets will offer you great moments. The point is to know what you want and where are looking for. But Warren Buffett thinks about bear markets as buying opportunities. The trick is that in such market periods the stock prices of large companies are going down. When that moment occurs watch in your favorite stocks. The time will do the rest. You should buy it when others are selling.