Isaac Newton once said: “What goes up must come down.” and that quote also applies to the stock market. When the prices go up in the stock market, traders start to worry about a potential stock market crash. If you are also worried about a stock market crash today, you can calm down while considering the fact that a stock market crash has happened every 1.84 years since 1950. Moreover, every stock market crash has been followed by a correction as we have seen in 2020. If you invested $10,000 on March 30, 2020 in the S&P 500 index, you just have over $16,000. Therefore, keep in mind that a stock market crash today will eventually end and you can minimize your losses or even make a profit if you manage the process right.
Below are some tips about how you can get ready for a stock market crash today.
- Invest In Different Sectors
The top stocks in the S&P 500 come from the technology sector and if you concentrate only on these top-performing stocks, your portfolio will be affected by anything bad that happened in this sector.
It does not mean that you should sell your stocks from the same sector immediately. However, you will need some backup stocks in case of a stock market crash. You can invest in some defensive stocks if you have enough money in order to diversify your portfolio. Utility stocks and consumer staples are good examples because they are usually not affected by the economic cycle and reach a certain level of demand all the time.
- Sell The Stocks You Do Not Want To Hold In The Future
If you hold a stock that you always have second thoughts about, do not wait for a high and sell it now. This is a piece of general advice about the stock market rather than a stock market crash today. Some stocks may not fit your future investment plans and lose their competitive advantage. In that case, you should get rid of them before a stock market crash and benefit from them with minimum loss.
- Take Lessons From Past Stock Market Crashes
The last thing you should always remember is that stock market crashes are inherent in the market and a stock market crash today will not last forever. Even if the market sees the dip, the probability of positive return coming from investing in the S&P 500 in a given year is 73%. The ratio increases to 87% over 5 years and 94% over 10 years. We know that waiting is very difficult if you see your wealth is decreasing, but you have to stay calm in a stock market crash today.