Protective Measures Investors Should Do Before the Unexpected Downturn

As the bull market continues to surge, most investors and forecasters are dreading the big downturn. A big downturn that can end the 9-year bull market and America will be plunged into the next recession. Here’s what you can do to prepare for the dreaded big one.

The Fear

According to financial experts, the bull market is set to reach a historic mark since the U.S. economy recovered from the financial crisis in 2008. The anticipated threshold crossing will mark the longest bull market, beating the previous record hailed from years October 1990-March 2000. Aside from that, the S&P 500 index increased up to 325% since it hit its lowest point of 666 last March 2009.

Despite the said gains, the Federal Reserve Bank of San Francisco estimates the looming financial crisis might cost every American an estimated $70,000 loss in their investments and lifetime incomes.

Aside from that, the impending effects of the trade war, the flattening yield curve in bonds, as well as current Turkey’s currency crisis have reignited the investor’s fears that financial crisis is already looming in. If you’re one of these wary investors, the financial advisors have offered these following tips to help you prepare in case of a big dip.

Don’t Try to Time the Market

Some investors tend to pull out their stocks or investments when they think the stock market isn’t performing well. While it’s a good defense mechanism to protect your money, David Karp of Pagnato Karp claims it’s not the best way to protect your investments. Aside from that, you couldn’t determine when the best time is to re-enter the market. The moment you get back in, the prices may already be expensive and way out of your league.

This causes you to rebuild your portfolio again. Instead of trying to time in the market, the best thing you can do is to keep holding on to your stocks and continue investing. Despite this looming crash, most stock markets generally have a positive, upward trend and tend to recover after a crash. Aside from that, Karp says it’s best to buy more stocks when the prices are going down. Then you can reap its benefit later when the stock market eventually recovers.

Karp claims hitting the right timing in the market is called luck, but investors shouldn’t rely on it and put their investments at stake.

Create Your Defense Strategy.

Just because you’ve chosen to stay in the stock market it doesn’t mean you need to be reckless when it comes to your investments too. Karp says you should also build a defense strategy to protect your money and your hard work.

You can protect your investments by diversification. Instead of putting all your investments in one basket, separate it into smaller ones and invest it in different companies and types of investments. It could even be better if you invest in the international market too. In this way, you don’t have to worry if a Recession will happen again since you have other investments to turn to.

Align Your Portfolio With Your Financial Goals.

According to Conway Wealth Group CEO Michael Conway, you should determine your financial goals first to prepare your financial plans and build your portfolio accordingly. For example, if your goal is to build your retirement funds, then you should invest in stocks in long-term to accomplish your goal.

If you aspire to start a business in 5 years, then you can invest in bonds or other short-term yield investments for you to use your money appropriately.