A market crash can destroy wealth for unprepared investors and create opportunities for patient ones. These three steps can help you prepare for it.
A market crash can destroy wealth for unprepared investors and create opportunities for patient ones.
These three steps can help you prepare for it.
What if the stock market crashes tomorrow? It's a question worth asking, especially when investors worry that high valuations, enthusiasm for artificial intelligence, or economic uncertainty could trigger a sharp sell-off.
History has repeatedly shown that the S&P 500 (^GSPC +0.41%) can fall 20% or more from a recent high during a bear market, and individual stocks can suffer much steeper losses.
Nobody knows when the next crash will happen. But you don't need to predict it to prepare for one. In fact, the best time to prepare for a market crash is before it happens, when you can still make decisions calmly rather than react out of fear.
Here are three practical steps investors can take today.
1. Make sure you won't be forced to sell at the wrong time
Imagine your portfolio falls 40% just as you lose your job or face an unexpected expense. You may have to sell stocks at depressed prices simply to pay your bills. That's a risk you can reduce now.
Start by building an emergency fund that covers three to six months of essential living expenses. Keep it somewhere accessible and relatively safe (like a high-yield savings account), rather than investing it in stocks.
Next, separate money you'll need within the next few years from money intended for long-term investing. If you're saving for a house deposit, tuition fees, or an upcoming retirement, you don't want those plans to depend on the stock market recovering quickly.
Averytin News Financial update.