If you want to get rich when the market collapses, you’ll need to stay patient and ignore the rollercoaster of emotions you will experience. There is no doubt that it is scary to witness economic turmoil. There is little you can do to help alleviate the situation, however, there are many things you can do to prepare yourself for better times ahead.
If you are invested in the stock market, it is known to hit many peaks and valleys throughout its’ history. The key thing to remember is to be patient and not watch ticker symbols constantly.
You’re probably sitting there watching your entire portfolio hit the crapper as the economy nose dives into a bear market. It’s quite alarming to see and even more nerve-racking to experience first hand.
Have a Strong Stomach During Bad Times
It’s hard to withstand the stock market crashing. One of the toughest decisions you can make is whether to buy, sell or hold on your positions during volatile periods in the market. If you are one of the many, you likely watch your portfolio performance throughout the day hoping for a miracle.
Many people tend to overthink the economy and start major sell-offs. Selling your position when the market is going down is basically you admitting defeat. Cutting your loses and selling your shares for less money than you bought is not investing!
Have a strong stomach during bad economic times and be patient while you ride out the market. There is no reason to panic, there is no reason to jump the gun; be patient and let nature take its’ course.
Buy When Those Are Selling
When the economy heads into turmoil, people go into panic mode to sell-off their portfolio and get into more stable cash positions. While cash might be king, it doesn’t yield you very much return on your money. If you take the opportunity to buy during market sell-offs, you can get rich when the market collapses.
If you are older and approaching retirement, it is understandable to feel the need to sell and get into safer cash positions. Other safe investments you can choose from include U.S. Treasury bonds, mutual funds or high-yield savings accounts.
While the sellers are waiving their white flags in defeat and cut their losses, buyers can come scoop up the shares for a discounted price during bad economic times.
You might be asking, “why buy a stock when the price continues to fall?” The reason you should buy when everyone else is selling is because that is how you can get rich during bad economic periods. You can buy cheap and hold on to the stock until the value increases. It’s a common way the people get wealthy and the wealthy get wealthier.
You probably think this is a no brainer and say, “why everyone doesn’t just buy stocks on a discount?” Because not everyone can afford to roll the dice. The reason people prefer to sell during a declining market is because he or she feels more comfortable in secure cash positions rather than being invested in companies that fluctuate in value every day. Many people fear bear markets and think a financial crisis is going to last forever.
However, bear markets don’t last nearly as long as you might think. It is rare to see a bear market run longer than 18-24 months. Although it might seem like an eternity, it isn’t. It’s a manageable time period that you can prepare yourself to be ready when the time is right.
How to Prepare for Financial Crisis
There are many different levels to bad economic periods. A market pull-back is often referred to when there is about a 5-7% dip in the economy. While these are not the best conditions, they are better than a bear market. When the market falls 10-12% it is considered a market correction.
It isn’t until the market declines 20% to declare it a bear market. When the market dives past a bear market heading even further into a complete market crash with over 30-35% declines in losses.
People often jump in too early, throwing money into stocks that are destined to drop even further. Be careful about going all-in at once, and practice the concept of averaging down. If you own a stock that cost a certain price per share, you can continue buying that stock as the share price falls during a bear market. This helps you lower your average price per share to get a better value on your investment. Although it is a slow process that requires patiences, this is how you can get rich when the market collapses. You will increase your ownership and overall assets in your financial portfolio.
During these times it is more and more alarming. Retirement funds can be wiped out almost instantly. Diversifying your investments can prevent reduce risk and spread out your money. While it is suggested to diversify your investment portfolio, you will need evaluate your choices carefully to make sure you are investing in good, quality stocks.
Invest in Dividend Stocks
The good thing about dividend stocks is that they don’t stop. While the overall market might take a dive, dividend stocks will continue to pay off in the long run. Dividend stocks are popular because they offer income producing assets for investors.
Simple index funds or ETFs are great options for dividend producing stocks. Investing in these types of stocks are helpful to give yourself diversity and not rely on one sole company as an investment. Instead, you will be invested in many different companies to give yourself more financial stability.
Some of the popular index funds to follow are the Standard & Poor’s S&P 500, the Russell 2000, Vanguard 500 index fund and Fidelity 500, there are plenty of different options you can choose from. Be sure to evaluate dividends, yield rates and the past 5 years of any investment you are analyzing.
Invest in Good Brands & Businesses
Although the economy might be spiraling out of control, that does not mean all companies are doomed. In fact, it can be looked at as an opportunity for some. Buying a good, quality company at a discounted price will never go out of style.
Warren Buffett and Charles Munger of Berkshire Hathaway have been notorious for buying good brand name companies at good prices. Dating back to their early days, they invested heavily in brand names like Geico Insurance, American Express and Coca-Cola. Today they still follow the same strategy, expanding to brand names like Apple, Bank of America and Delta Airlines.
Invest in quality companies that have a good businesses. If you think about the products that you use everyday, you can figure out the right companies to invest in with the proper research.
Stay Cautious But Active
While buying during bearish markets is suggested, it is also highly recommended to stay cautious as well. During volatile times, the market can sink lower than expected and the Fed has to step in. There are times when you think you are making a great decision but the market might take a swing in the wrong direction.
Be mindful about each investment you make, have a strong stomach during market pull backs. Selling is not always the answer. Instead, you might be able to get rich when the market collapses.