In recent years, the Dow Jones Industrial Average finished the first week of January under 13,000. In case you’re wondering, that’s not good. Want a point of reference? How about this?
It was the worst year’s opening in a quarter century.On top of it all, crude oil briefly found its way to the $100 a barrel mark for the first time ever and gold, for a moment, traded at $868 dollars an ounce. So you know: The record was $875 an ounce according to WorldNetDaily, and that was during the Iranian hostage crisis.
Want us to stop? Sorry, can’t. Also on a January 8th in recent years, Wall Street finished the worst five consecutive trading days ever. Said another way, the S&P 500 lost 5.3% in just five days. That broke the record of 5.2% in 1932.
Said another way, we’ve been moving in this direction for awhile now. “It was nasty,” says Chuck Stutenroth of ZAR Fund Group. “We had November, December and now, this.”
Now this, meaning what? A recession? A stock market crash?Yes, my friends – it’s possible.
The worst stock market crash in history: The Great Depression
Back on October 29, 1929, the worst stock market crash in our country’s history took place. Why? Because between 1921 to 1929 the Dow Jones rose from 60 to 400. Isn’t that a good thing?Not this time.
You see, this caused people to buy stocks at an alarming rate, considering it an unbelievably safe investment. Thus, the market became overheated. The Feds tried to raise the interest rates in response to this, but the action didn’t work. People got rich. They continued to buy stock.
Unfortunately, when the crash occurred-remember that anything that seems too good to be true probably is-most people’s money was invested in the stock market. Thus, it was gone.
Hence, The Great Depression had begun.
How to Survive a Stock Market Crash
Here’s the number one little nugget. Don’t have all of your money tied up in high-risk American stocks. Those that didn’t back in 1929 weren’t hit as hard. In other words, have your money in foreign stocks, bank accounts, real estate, hard investments, and bonds so if stocks crash it doesn’t guarantee you’re in immediate trouble. Further, it’s always a good idea to have a significant amount of cash on you in a safe place at home (this will be brought up again later in this article). After all, when it all hits the fan cash is a good thing to have (especially considering that terrorists would probably love to hit us during a terrible stock market crash).But that’s another story.
By the same token, it’s probably important to remember that Dow Jones and S & P falls are the rule, not the exception. In other words, they’re healthy to an extent. For example, during the terrible slide of 1973-74 (when Richard Nixon was President) the S&P 500 index lost 48 percent of its value. On top of it all, Nixon was out as President, oil prices went through the roof, and inflation flew up to 12 percent.
Then came the rebound. Namely, in 1975 there was a 37.2 percent return and in 1976 a 23.8 percent gain.
So panicking is never good. A couple things you can do instead …
Seek advice: First become familiar with sound financial investment strategies for making it through rocky markets.
Talk to expert(s): For example, Betting on short term gains may seem good in the short term, but you want to look at the overall reach of your investments to make it through a collapse or depression. An expert can point you in the right direction.
Byproducts of a Stock Market Crash
Remember that if a major crash occurs, gas prices will go up, people will lose jobs, food prices will rise, and the same with oil. Now imagine if you lost your job and all of that took place on top of it.That wasn’t rhetorical. Really, you should imagine it. Because if you do then it might lead you in the right direction. Along with this, here are some ideas.
Safeguard Yourself in Advance
Get rid of debt: This is idea number one. Pay off those credit cards. Pay off all loans that you can. If you can start paying off more of that mortgage, now may be the time to do it as well. Those with the least amount of debt will be affected the least when the crash occurs.Have cash on you: If such a crash were to occur, banks would be rendered useless for a period of time. In other words, say goodbye to checks and credit cards. Thus, having a significant amount of cash in small bills (people won’t have change) would be wise.
Invest in hard assets: We’re talking gold and silver bullion and coins here. These will endure beyond the problem and can also be used under terrible circ*mstances if needed.
![How to Survive a Stock Market Crash (1) How to Survive a Stock Market Crash (1)](data:image/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==)
The Final Thing to do in Preparation for a Stock Market Crash
Be ready to survive. There will be civil unrest. Terrorists might choose just that time to strike. In other words, chaos could ensue.Think about an alternate fuel source for heating and more. Do you have the kind of warm clothing you might need to survive? Do you have dry foods and other non-perishable food items that can last for a long period of time? How about water supplies?
Also, make sure that you have proper food storage bins, etc.
Just in case things get really bad, it would be wise to have tools for hunting and fishing on hand, as well as knowledge and experience in the wilderness. This includes ways and resources (and an area of land) for raising your own food. Because the time may come that stores in your area close there doors for good.
If you live in the city – you’ll want a hand gun to protect from looters and dangerous criminals, maybe even a gun and plenty of ammo for each member of your family.Better yet, get yourself a Bible. This sounds a lot like things said to come in the “last days”, and if that’s the case there’s only going to be one way out of this, and that’s through Christ and an understanding of just what exactly is taking place in the world.
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by James Roberts
FAQs
There are a number of steps to take to deal with a stock market crash, including being prepared beforehand.
- Portfolio diversification. ...
- Don't panic. ...
- Buy the dip. ...
- Dollar cost average during the decline. ...
- Add bonds. ...
- Tax-loss harvesting. ...
- Keep your long-term focus. ...
- The crash of 1929.
What to do when all stocks are down? ›
What to do during a stock market crash
- Know what you own — and why. A fear-driven reaction to a temporary slump isn't a good reason to dump an investment. ...
- Trust in diversification. ...
- Consider buying the dip. ...
- Think about getting a second opinion. ...
- Focus on the long term. ...
- Take advantage where you can.
What to buy during a market crash? ›
Down markets are also a chance for investors to consider an area that novice investors might miss: Bond investing. Government bonds are generally considered the safest investment, though they are decidedly unsexy and usually offer meager returns compared to stocks and even other bonds.
Where is your money safest during a recession? ›
Where to put money during a recession. Putting money in savings accounts, money market accounts, and CDs keeps your money safe in an FDIC-insured bank account (or NCUA-insured credit union account). Alternatively, invest in the stock market with a broker.
How to prepare for the next crash? ›
The best way to prepare for the next market crash is by diversifying your investments. Diversification allows you to reduce the risk of losing all of your money in a single market crash. A typical approach to diversification is to invest in a mix of stocks, bonds, and other assets.
How to prepare for the big crash? ›
Here are 10 practical strategies to shield yourself from a stock market crash:
- Get a Thorough Understanding of Your Portfolio.
- Buy the Dip.
- Focus on Securing Long-Term Returns.
- Diversify Your Portfolio.
- Re-evaluate Risky Investments.
- Practice Dollar Cost Averaging Instead of Timing Your Way Out.
- Consider Dividend Investing.
What is one thing never to do when the stock market goes down? ›
Panicking when your portfolio decreases drastically and selling is the worst thing to do. Avoid such a mistake by understanding how the market works and setting a personal risk tolerance. Experiment with a stock simulator to identify your tolerance for risk and insure against losses with diversification.
Who keeps the money when a stock goes down? ›
Just as a high number of buyers creates value, a high number of sellers erodes value. So even though it might feel like someone is taking your money when your stock declines, the cash is simply disappearing into thin air with the popularity of the stock.
Who gets the money when a stock goes down? ›
“In other words, the money did not exist or disappear for long-term investors if you did not make any transactions. However, for short-term investors, when stock prices go up or down, the money would be transferred among them as a zero-sum game, i.e. your losses would be others' gains, and vice versa.”
What not to buy during a recession? ›
During an economic downturn, it's crucial to control your spending. Try to avoid taking on new debt you don't need, like a house or car. Look critically at smaller expenses, too — there's no reason to keep paying for things you don't use.
Cash: Offers liquidity, allowing you to cover expenses or seize investment opportunities. Property: Can provide rental income and potential long-term appreciation, but selling might be difficult during an economic downturn.
Do you lose your money if the stock market crashes? ›
Do You Lose Money When Stocks Drop? When the stock market declines, the market value of your stock investment can decline as well. However, because you still own your shares (if you didn't sell them), that value can move back into positive territory when the market changes direction and heads back up.
Should I take my money out of the bank before a recession? ›
Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.
Who gets hurt the most during a recession? ›
Industries affected most include retail, restaurants, travel/tourism, leisure/hospitality, service purveyors, real estate, & manufacturing/warehouse. Despite the severity of any past downturn, markets have always recovered, and in many cases, they have seen a monster rebound.
What is the best thing to do with cash during a recession? ›
Where is your money safest during a recession? Many investors turn to conservative asset classes such as bonds during recessionary periods. Mutual funds may also be a useful area to consider, and so may established, large-cap companies with strong balance sheets and cash flow.
Will I lose all my money if market crashes? ›
Do you lose all the money if the stock market crashes? No, a stock market crash only indicates a fall in prices where a majority of investors face losses but do not completely lose all the money. The money is lost only when the positions are sold during or after the crash.
Should I take money out before market crash? ›
Losses aren't real until you sell. Some investors believe that by selling during a downturn, they can wait out difficult market conditions and reinvest when the market looks better. However, timing the market is extremely difficult, and even professionals who attempt to do this fail more often than not.
How do people lose money if the stock market crashes? ›
Sometimes, however, the economy turns or an asset bubble pops—in which case, markets crash. Investors who experience a crash can lose money if they sell their positions, instead of waiting it out for a rise. Those who have purchased stock on margin may be forced to liquidate at a loss due to margin calls.
Who loses money when stocks go down? ›
A decrease in implicit value, for instance, leaves the owners of the stock with a loss in value because their asset is now worth less than its original price. Again, no one else necessarily receives the money; it simply vanishes due to investors' perceptions.