How to prepare for stock crash

How to prepare for stock crash

Introduction

A stock crash refers to an abrupt decline of prices of stock in a stock market. This decline leads to a subsequent loss of paper wealth. The Stock crashes are normally driven by flight and other fundamental economic factors. Often, they follow stock market bubbles that are speculative in nature. Stock crashes are social phenomena. For stock crashes to, certain conditions must exist like long periods of rising prices of stock and excess economic optimism, too much use of margin debt and leverage by participants of the market. Despite the government's hard work to try and prevent stock t crashes, it is said that the Government should not intervene in a free market. Here are a few tips that can help investors to prepare for stock crash.

 

Step 1

Ensure that all your money is not invested in stocks that are of high-risk.

For Stock crash not to make you lose all your investments, make your investments widespread. For example, have stocks in real estate, bonds, bank accounts, hard investments and foreign stocks. This way, if there is an occurrence of a stock crash, you are not guaranteed of immediate trouble.

Step 2

Clear consumer debts.

When a stock crash occurs, there may be depression. Paying debt during depression is hard compared to paying it up before depression occurs. Clear your credit cards for stock crash not to hit you hard.

Step 3

Pay your mortgage.

To most people, mortgage is a burden. For stock crush not to occur and find you in debt of your mortgage, you can start off by paying off a certain percentage of the mortgage. This will reduce your burden of debt. If times get tough to a point where you do not have any income or any savings, it may be a jeopardizing situation.

Step 4

Save up for emergencies.

Accidents do happen. Even other urgent needs for money. Ensure that you have savings you have reserved in case of emergencies. For stock crash not to leave you without a penny, keep in mind the fact that if a stock crash occurs, the people lose jobs, gas prices shoot and food prices also go high. Imagine if all this happens, a family member falls ill and you have no money?

Step 5

Invest in assets.

This can be of very great help during this period. While others are being hit hard by the depression, you will be having something to smile about. The investments you make now determine your future. For stock crash not to make you regret investing, invest wisely.

Step 6

Diversify your skills.

Do not just rely on that which you do at your work place. For stock crash not to occur and leave you with minimal skills, adopt new skills to be able to do different things. This way, even if you lose your job, your range of skills will help you survive.

Step 7

Prepare yourself for survival.

Probability of chaos arising is quite high once a stock crash occurs. Think about alternative sources of fuel for heating, dry food, non-perishable food and even water for stock crash not to occur and make you not have the basic needs. Have proper storage for your food.

Conclusion

The stock crash that occurred in 1929 caused a financial crisis, fear and denial. This crash marked the beginning of long lasting and widespread consequences for the U.S There was a rise in the rate of unemployment. To say that this stock crash made the economy devastated is actually an understatement. Most people lost their saving, many companies were ruined and people lost faith in banks. Economists and Historians still try to study the crash with the aim of coming up with a comprehensive report of what caused it but nothing yet. Banks have however put up regulations that may be promising that severe crashes will not occur. The government on the other hand can infuse cash into banking institutions. This way, it is going to increase liquidity in the market. A liquid market has lots of buyers and sellers trading assets. However not everyone accepts that action should be taken for stock crashes not to happen.

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