What Would You Do If There Was a Stock Market Crash Today?

Savage Villoch Law, PLLC
06
May

stock market crash today

Did you know that on February 5th, the stock market suffered the largest crash in years? The drop was of approximately 4.6 percent with the Dow Jones dropping almost 1,600 points. This was the largest crash since the 2011 European Debt Crisis.

If you’re here it means that you’ve investments in the stock market and, want to get ready for a stock market crash. Because we know that it’s better to be safe than sorry and, it can happen at any time.

Don’t know how? We have you covered!

Want to get ready for a stock market crash today?

Will the Stock Market Crash Today?

So you’ve been investing in the stock market for a long time, and know that you can make good money from your investments. But, this will depend on how much risk you can stand.

Even if your investment risk is in the range you can handle, the inevitable can happen. In other words, the market can crash and you can lose a lot of money. Now the question is, can you prepare for a stock market crash?

Yes, you can! Stock market drops are a bit predictable; you just have to know how to spot the signs. Yes, you might not know exactly when it will happen or by how much it will drop.

But, we all know the ups and downs of the market. This information can give us an idea of what to expect. Sometimes these drops happen unexpectedly like the crash we saw in February.

This means bad news if you need your money right away. Because we should try to weather the storm when a market crash happens, and try to sell when we are over or close to buying price. We don’t invest in stocks to lose money.

That’s why experts say you shouldn’t buy stocks with money you’ll need in the next few years. If you don’t do this, a market crash won’t be a huge issue for you.

How to Spot a Possible Stock Market Crash?

A stock market crash can happen any day because that’s how the market works. And, don’t start saying that it crashes because things get more expensive because that just isn’t true.

Even though a market crash isn’t 100% predictable; there are several signs that might tell you that it may happen soon. According to experts, rapid increases in the value of stocks can mean that the market is going to crash.

Yet, not all rapid increases end in a market crash. Experts have found that market crashes caused by value run-ups are accompanied by the following:

Stock Volatility

The volatility of the stocks is measured by the VIX index. According to experts, this index is currently at all time lows.

We’ll have to keep an eye on the factors that keep stock volatility in the low values. Some of the factors that influence this index are corporate buybacks, low inflation, the liquidity of central banks and low interest.

Number of Initial Public Offerings (IPO)

The number of IPOs can be a telling factor because of the issues that can arise with the newly issued stocks. In 2017, the number of IPOs in the US was moderate in contrast it was high around the world.

It was the highest number for IPOs around the world since 2007. Experts are expecting this number of IPOs to be high for 2018. We should be following this number closely because it can translate into market excess that can cause the market to plummet.

Melt-Ups

Melt-ups are accelerated price increases. We’ve seen value increases in the market but we can’t be certain if it’s melting up yet.

One thing we know for sure is that a melt-up is close by; it’s just a matter of when it will happen. It will be difficult to predict because the largest factor that determines it is human behavior.

The Stock Market Dropped: Now What?

The unexpected happened, the stock market plummeted, and the value of your stocks went down the drain. We know the stock market will get back up, the question is when.

You must be asking yourself what you should do when the stock market crashes. Here are some things you can do when the unexpected happens:

Do Nothing

Yes, you read that right. The best approach when the market crashes is don’t do anything. You’re probably being flooded by the media, friends, or advisors about it.

Stop yourself from going into panic mode, and call your advisor to sell everything. You started investing for the long game. Don’t quit now!

Buy Stocks

When there’s a market crash is the best time to buy stocks. If you have the money go for it, buy that stock you were planning to buy anyway.

If you buy the right stock during a market crash you’re going to get it at a lower price. But, be mindful that if you buy it you’ll have to sit down and play the long game.

Don’t Give into the Urge

When the market crashes, many people go into a frenzy or panic mode. You might want to sell your portfolio when you see how much you’ve lost.

Yet, the right way to do it is to wait for the storm to pass. Betting on selling and getting back into the game when the market gets better is a bad call. There’s no way for you to know if or when the market will come back to the good old days.

Rebalance Your Portfolio When the Time Is Right

A savvy investor knows that diversification is the key to having a good portfolio. Even when you diversify the right way, a market crash can send your portfolio down the drain.

Maybe you should consider diversifying, getting rid of those tech stocks you bought years ago. But, you should do it only after the storm has weathered. Don’t panic, remember that when it comes to stocks you’ve to play the long game and, be patient.

Wrapping It Up

As an investor, you can never be 100% ready for a market crash, but if we do our research, and what to do when the unexpected happens we can prepare for it. So remember if there’s a stock market crash today, you should focus on your investment goals and resist the urges of going into panic mode.

Did you fall victim to or want to get ready for when a stock market crash happens? Need to hire a stock market attorney? We can help!

Contact us for more information about our services.