5 Ways To Prepare For The Next Stock Market Crash

Jul. 22, 2020 1:12 AM ETAAL, AAPL, AMZN, CRM, DAL, META, GOOG, GOOGL, HTZ, LUV, NFLX, NOW, QQQ, SPY, TEAM, TSLA, TWTR, UAL263 Comments

Summary

  • Market crashes happen regularly and are an inherent part of investing.
  • A significant market sell-off is always potentially around the corner.
  • Going through a large market drawdown unscathed is only a matter of preparation, primarily from a psychological perspective.
  • Accepting and embracing volatility is a necessity to benefit from the returns the market has to offer over time.
  • Let's review five ways you can make sure you are prepared and able to successfully maneuver the next time the market tanks.
  • I do much more than just articles at App Economy Portfolio: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Source

There's been quite a lot of negativity and pessimism lately.

There are countless articles from analysts who claim to know that the next market crash is upon us. The world "bubble" is thrown around on Twitter (TWTR) and across financial media. They did not see the 35% decline coming, nor the subsequent 40% recovery. Yet, they want you to believe that they have insights on what happens next and claim that it's 1999 again.

The Nasdaq (QQQ) recently hit a fresh all-time-high as COVID-19 cases continued to rise in the United States. As a result, the bears are out in full force, arguing that there is no safe place to hide, or claiming that it will "all end up in tears."

This idea that investing in stocks always ends poorly is such a baffling concept when you consider the outstanding returns generated by the stock market over more than 150 years. Those who are solely focused on when the music might stop are the ones that will likely miss the party altogether.

The truth is, nobody knows where the market is headed next. I recommend you run away from any charlatan who tells you otherwise.

Volatility is a natural part of investing. Not only should you accept it, but you should also embrace it. The possibility of a market crash should not be a reason to change your strategy, because your strategy should be built assuming market crashes will occur, to begin with.

Today, I want to cover the ways you can prepare for the next stock market crash, be it in a day, a week, a month or a decade. And I don't mean to discuss all-weather portfolios or diversification. The point of this article is not to make sure you avoid the next market crash by timing the market or barricading your portfolio

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This article was written by

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My name is Bertrand Seguin. I'm a former PwC consultant and veteran financial executive in the video game industry. I've spent 12 years at Bandai Namco Entertainment, leading the Financial Planning and Analysis team in the transition to Digital, Mobile, and Game-as-a-Service. I hold a Master of Science in Management and Finance.

My portfolio is built to disproportionately benefit from the rise of the app economy, the range of economic activity surrounding mobile applications. My investment plan and asset allocation are a result of secular trends I have identified (macro) and in which I take individual bets (micro). I invest with a very long time horizon (ideally 10+ years).

I am fortunate enough to have seen my strategy deliver outstanding results throughout the years.


Discipline and consistency win the game over time. Unfortunately, many investors violate their own model or strategy when their portfolio performance is temporarily disappointing. I would rather sell too late than too early, so I tend to never sell. I let my winners compound to a significant portion of my portfolio and let my losers become insignificant over time.



Disclaimer:

All App Economy Insights contributions to Seeking Alpha, or elsewhere on the web, are personal opinions only and do not constitute investment advice. All articles, blog posts, comments, emails, and chatroom contributions by App Economy Insights - even those including the word "recommendation" - should never be construed as official business recommendations or advice. In an effort to maintain full transparency, related positions will be disclosed at the end of each article to the maximum extent practicable. The premium service App Economy Portfolio is a research and opinion subscription. I am not registered as an investment adviser. The majority of trades are reported live, but this cannot be guaranteed due to technical constraints. Investors should always do their own due diligence and fact-check all research prior to making any investment decisions. Liability of all investment decisions reside with the individual investor.


Disclosure: I am/we are long AAPL AMZN CRM FB GOOG NFLX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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