[BEFORE MAKING ANY CHANGES TO YOUR INVESTMENTS BE SURE TO CONSULT WITH A PROFESSIONAL, such as a certified FINANCIAL PLANNER or certified FINANCIAL ANALYST. The information that follows is NOT a recommendation and is supplied purely for information purposes.]
Financial pundits, gurus, advisers in the press, etc. are coalescing on an impending stock market correction just about anytime in the very near future. If that happens, those experts are predicting that the STOCK MARKET WILL DROP LIKE A ROCK and by as much as 25% or more!!
Do you have any money in the stock market? Your registered retirement plans? Dividend payers you depend upon? Will it really drop like a rock? What should you do?
I certainly can’t advise you on strategies or tactics appropriate to your particular circumstance. But there are some generic guidelines that you might want to review to better prepare yourself should a stock market collapse actually take place.
And that is where we begin…
IF THE STOCK MARKET COLLAPSES BY 25% in the NEAR FUTURE, here are some tactics to consider:
COMMON SENSE TACTICS
- Do everything in your power to make yourself a more valuable employee and to protect your current employment. If a downturn in the stock market does happen, people will suffer from lost sources of income from the stocks they own, and that will cause them to trim back on their spending. If demand for goods tightens more than what it is now, companies will lay off more employees to protect corporate bottom lines, (profits). So, prepare yourself NOW by becoming more valuable on the job, keeping a resume updated, and avoid rocking the boat. [Search this website for “valuable employee” tips, and tips regarding resumes and interviews.]
- Start now to trim back on any unnecessary spending. Redirect those savings into paying down your debts. Some advocates of building wealth will recommend starting with the highest-cost, meaning highest interest rate debts first. Other wealth gurus recommend the smallest amount of debts so you can then redirect those dollars to higher-cost debts once the lower amounts are paid off. Pick either one since they both are useful strategies to help eliminate debts.
- Begin your downsizing efforts now. If you have a large home with lots of wasted space and rooms you seldom use, put it up on the market while there still is a resale real estate market and buy a much smaller, lower-cost home. While there still remain people with some disposable income, or who just have no clue and love to go deeper into debt, consider selling off your: second and third vehicles; recreational vehicles and motor toys and trailer; vacation homes you seldom use or don’t absolutely need; most of your 200 pairs of shoes; most of your wardrobe you can’t possibly use or need; most of your kids’ toys; your collection of antiques, comic books, sports cards, etc. Mind you, these are merely ideas and not a recommendation for your particular circumstances.
- Turn your unused, seld0m-used, or unwanted assets, (things), into cash by holding garage sales, placing items on consignment with retailers, selling on eBay or Kijiji or an equivalent, etc.
- Start now to learn something that you can LIKELY turn into salable knowledge in the eventuality that you are laid off like millions of others have been thanks to foreign competition and foreign manufacturing. [Search this website with terms such as: “Richer”, “Own Business”, “Entrepreneur”, or even “Entrepreneur”.]
- If you do wish to start a business venture while you are still employed, a good idea to test the waters, consider doing so in the evenings and weekends, provided your current employment contract will allow you to do so. Let your “part-time” business PROFITABLY grow until it becomes obvious that you can SAFELY move out of your current full-time employment and begin to work in your own business full-time. [Search this website with terms such as: “Richer”, “Own Business”, “Entrepreneur”, or even “Entrepreneur”.]
- Retain and protect any sources of incoming money. Eg., make yourself more valuable to your current employer. You can never build wealth if you don’t have a stable, reliable, good stream of money coming into your household. So, if you have one, don’t risk losing it.
- Consider redirecting as much of your incoming money, as you are able to, to paying down and paying off your debts–after important financial obligations and family necessities, of course.
- IF you believe that the stock market will collapse by as much as 25% in the very near future, then NOW is the time to move your money from those potential collapsing stocks and into a safer place. Where? Everybody will have an opinion. One thing is certain. No one strategy or tactic will fit everyone. If you are totally confused, or lack trust in recommendations you receive, a reasonable strategy just may be to return your investments to cash and wait out the impeding stock market storm, if there is one. But, this is not to say that cash is going to be your own particular best strategy or tactic. That is why it is important to discuss your plans with financial experts whom you trust.
- Some high-risk, savvy investors may venture into HEDGING by gambling using OPTIONS on the VIX or on the stocks themselves. This is not a gamble to be used by inexperienced “hedgers” or traders.
- Inverse ETFs. For those not familiar with ETFs, the simplest way to explain them is to suggest that they are somewhat like mutual funds. In the case of inverse ETFs you are buying in hopes of the stocks it “owns” moving in a certain direction, inversely.
- STOP-LOSS strategies. For the uninitiated, a “stop-loss” is a price at which you decide to sell your stock should it decline to that price point to “stop” any further price decline. At that price point you stock is sold.
Though no financial vehicle, strategy or tactic can apply to everyone, there is one piece of wisdom that does fit almost everyone: plan and act on your best financial strategies starting right now…