One thing is for sure, the market will crash. The question is ‘when’. Unfortunately, it’s not an easy task predicting when will an economy collapse. You will know if you have watched The Big Short, a movie based on the stories from the 2008 global economic collapse.
We will not tell you we know when the market will crash but we can tell you exactly how to prepare for one.
Prepare for (almost) any type of an economic crash
If the world is in a nuclear disarray, there will probably be little of what our tips could help you. That’s a different set of problems.
But, in any other case, there are some things you can do to guarantee your relatively safe return even in a case of a market crash.
It’s crucial to:
- Understand the benefits
- Realize the opportunities
Opportunities in a time or crisis
Tony Robbins recently released an all-in-one book about finances. During his book tour he emphasized that the crash is inevitable (no matter ‘when’) and gave numerous examples of how you can turn a crisis to your benefit.
For example, a stock market crash means that for cents on a dollar you get to shop around in the S&P 500 and Dow . As a result, you can get huge annual returns afterwards (even as high as 12%-14%).
In short, it’s a skill that you can develop, not know in advance where you should put your money before and during a financial crisis. Read Ramit Sethi’s book, read Tony Robbins’ book, follow smartest investors.
You don’t need to become an expert. Just a few things will put you ahead of 80% of people.
Finally, diversify. You can never be sure about a specific outcome but only an extreme lack of luck could ever result in 3-4 different pieces of your portfolio collapsing. Keep some ion the bank, in the bonds, even leave something for withdrawal at casinos.
And here’s one tip for the road: automate. You don’t need to follow Ramit Sethi’s blog but just do one thing – automate your saving and investing. The less time it takes, the easier it will be to stay on stack (or even make adjustments if needed).
There is no need to panic. Preparing for the worst does not mean that. But just like in an airplane you must first put the oxygen mask on yourself and then help others, preparing for a crash will basically serve the same purpose.