How to Prepare for Stock Market Crash?
๐The S&P 500 $SPX500 is ๐๐ค๐ฌ๐ฃ ๐๐ฎ ๐ญ% ๐๐ง๐ค๐ข ๐ผ๐๐ and for some reason, people are panicking about it. A correction is a 10% drop while a crash is a 20% drop. We are far from a correction or a crash but sooner or later they will come and it is important to know how to prepare ourselves against them.
๐ฒ Nobody knows what the market will do today, next week or next month. It is ๐๐ข๐ฅ๐ค๐จ๐จ๐๐๐ก๐ ๐ฉ๐ค ๐ฅ๐ง๐๐๐๐๐ฉ ๐ฉ๐๐ ๐จ๐ฉ๐ค๐๐ ๐ข๐๐ง๐ ๐๐ฉ ๐ค๐ง ๐ฉ๐ค ๐ฉ๐๐ข๐ ๐๐ฉ. But we can always look at different scenarios of what may cause a crash. There's, however, always the possibility that something we didn't predict comes and crashes the market. For example, a pandemic, a war or an alien invasion.
๐ฆ The main reason why stock prices are so high today is because of ๐๐ ๐๐ง๐ค๐ข ๐ฉ๐๐ ๐๐๐๐๐ง๐๐ก ๐๐๐จ๐๐ง๐ซ๐ ๐๐ฎ๐จ๐ฉ๐๐ข. If eventually, we have higher inflation, the Fed will have no choice but to raise interest rates. So, they might be the reason for the crash.
โ๏ธ Another possible cause of a crash might be ๐๐ฃ๐ฉ๐๐ฉ๐ง๐ช๐จ๐ฉ ๐ฅ๐ง๐ค๐๐๐จ ๐๐ฃ๐ ๐ง๐๐๐ช๐ก๐๐ฉ๐๐ค๐ฃ๐จ on the big tech. Apple $AAPL , Microsoft, Facebook, Google and Amazon are 22% of the S&P 500 today. The bubble is only in a few stocks.
๐ฐ This stock market bubble has led to much ๐จ๐ฅ๐๐๐ช๐ก๐๐ฉ๐๐ค๐ฃ. For example, we can see a high correlation between Tesla $TSLA and Bitcoin $BTC . The problem with speculators is that as soon as they see a 1% drop, they are scared and they start selling, causing an actual drop.
๐ธ It is important to have ๐ก๐ค๐ฌ ๐๐ค๐ง๐ง๐๐ก๐๐ฉ๐๐ค๐ฃ ๐ฌ๐๐ฉ๐ ๐ฉ๐๐ ๐ข๐๐ง๐ ๐๐ฉ and avoid stocks with high institutional ownership. Diversifying in other asset classes such as cash, bonds and gold $GOLD can be dangerous, especially with cash and bonds as the yields are lower than inflation. I have some cash and cash equivalents in my portfolio but that's only temporary after the GameStop $$GME profits and I'll be using them to buy stocks.
๐ญ Best way to prepare for a crash is to ๐๐ค๐๐ช๐จ ๐ค๐ฃ ๐๐ช๐ฃ๐๐๐ข๐๐ฃ๐ฉ๐๐ก๐จ. You can never go wrong on fundamentals. What investors expect over the long-term when investing in a company is cash flow. Even if the stock market is down 90% and we have a 20 year bear market, if you hold a great company, you have nothing to worry about. The more it crashes, the more you buy.
Watch the full video on YouTube:
https://www.youtube.com/watch?v=i4fMHAihct8&list=UUPO3uUyoXSaFWG-Ldq1mqEQ&index=1
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