Gearing Up For The Next Market Crash – Darren Straniero, CFP®

Gearing Up For The Next Market Crash - Darren Straniero, CFP®
Gearing Up For The Next Market Crash Darren Straniero

Still, you might feel differently. I imagine some of you do. And that’s okay. It’s your money. You’re likely emotional about it. And if you’re convinced the next market crash is around the corner, then it might be time to re-evaluate your investing plan.

So let’s talk about a few steps you can take and steps you can control.

First, any steps you take should be small and gradual. And they should be steps we can reverse — you know, in case you turn out to be wrong 😉. And if you turn out to be right, you’ll take solace in that. Just remember, small steps. These little steps can help create peace of mind during rocky markets.

And that means looking outside of your investments. Maybe you’re sitting on a big pile of cash — from a bonus, inheritance, savings, whatever. If so, think about using the cash to pay down or pay off your mortgage. Paying off a mortgage at 4% gives you a 4% return with no risk. And since debt can cause stress and anxiety, especially during a tough economic time, lowering or erasing that debt might help you sleep better at night.

Before you turn that savings engine off, be sure to set a predetermined date to start that savings engine back up. Maybe that’s six months from now. And the flip side could be you agree to automatically begin buying again if the markets fall by say 20% or more. This could allow you to take advantage of a drop in the market.

*note: if you decide to turn off your savings engine, do not, I repeat DO NOT spend it. Sock it into a separate savings account and automate that savings so it doesn’t get consumed by your lifestyle.

Then you might be too invested in stocks. Time to trim your allocation. But ease into it — remember, small gradual steps. You might decide to reduce stocks from 80% of your portfolio to 60%. Make those changes over time, not all at once. Maybe that’s 5% from stocks to bonds every 6 months. It could be every 3 months. You get the picture.

Becoming a better investor starts with your behavior. Hopefully these tips are a good start and help improve your investor behavior. If you’re not sure what to do or how to take action on these tips, let me know.

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