Most people have never experienced a stock market crash or hurricane other than seeing the news reports of the aftermath. Regarding hurricanes, unless you’ve actually spent a night crouching and wondering if your house will be blown away, you “just don’t get it!”
Those of us in Charleston, South Carolina who experienced “Hurricane Hugo” a few decades ago are experienced and we “get it.” We usually stockpile various emergency supplies. We may have to go weeks without electricity and living on our supplies if the grocery stores were destroyed!
Effects of a major stock market crash
Similarly, considering the impact of a major stock market crash, few “get it.” Like hurricanes, stock market crashes are devastating. Perhaps more importantly, again Börsencrash 2022 like hurricanes, there are frequent “near calls” that cause everyone to “get ready” but then it doesn’t happen.
People become desensitized and start ignoring the warnings. Some even wait for the opportunity to brag to their friends, “Look, I told you nothing was going to happen. I told you not to get upset about anything.”
Coastal folk hope there won’t be a hurricane, but those of us who “got it” stay prepared for a direct hit! Likewise, the prudent stock trader is hoping a stock market crash won’t happen, but bracing for the possibility that it will anyway. It’s not paranoia. It is advisable to be prepared!
As we begin the 2012 Charleston hurricane season, those of us who “get it” are taking the time to review and update our homeowners insurance policy.
Is your stock account insured?
Cash is the best insurance for the immediate needs of any portfolio .
Cash is also a position. In this case, cash can be useful as a tool to offset losses by taking advantage of buying opportunities when stocks have plummeted. You can buy more stocks you own while prices are temporarily low. You can add new positions (and make explosive, loss-breaking gains) by buying stocks in companies that are likely to recover quickly. When fundamental and technical factors are pointing to a stock market crash, it’s a good idea to gradually take profits wherever you can and build up your cash position.
Gold is the best insurance for the ultimate needs of any portfolio
In addition to positions I may hold in gold mutual funds and gold mining companies, I keep between 5 and 10 percent of portfolio value in actual bullion. If there is a global war; or the internet will be disabled; or one of many other conceivable catastrophes occurs; All stock trading could be halted by regulators. Gold ensures your viability, hopefully until trading resumes. If things are so bad that your stocks have lost all value, then your gold should have skyrocketed in price, perhaps making up for most of the lost value of your stocks.
Hurricanes and stock market crashes have a lot in Börsencrash 2022 common. While both can be devastating, both can be survived. In a stock market crash, it’s possible to come out better on the other side. Not only can you survive it, you can even benefit from the dramatic price volatility. However, you must take the right steps before the crash!