5 ideas to better prepare for the next stock market crash/correction.
In 2020, I invested most of my cash in one stock ETF (indexing the worldwide market) in the middle of the COVID crisis.
When the market goes down, rationally, we all know that we should buy.
And yet, most investors sell.
I am no exception to the rule, and I have done so in the past.
But during the last crisis, I did something different and invested heavily. It gave a boost to my search for financial independence.
5 things that made it possible.
I read books on finance. And they often describe the crash process. JL Collins, in his book The Simple Path to Wealth, writes, a market crisis when you have cash is a windfall. This concept has matured in me.
“During this accumulation phase, celebrate market drops. While you are in the wealth accumulation phase, these are gifts. Each dollar you invest will buy you more shares.” JL Collins
More than 25 years ago, I found myself in the French Karate military championship final. I had lost early in the competition in my weight category (-70kg). Winning in all categories (no weight limit)was my last option. I had observed my opponent and he had great attacking power. Before starting his action, he often made a "little call" with his hand. I visualized this situation and programmed myself to counter as soon as I saw this "little call." I won with this technique.
Why am I telling you this?
A crash becomes the "small call." As soon as it appeared during COVID, I started to invest. I was mentally prepared.
3. Reflect on the subject and develop your principles in calm weather.
"Markets always go up." I reflected on this concept in calm weather. I ended up embracing it. A strong belief will help you act when everyone else is screaming to the contrary.
4. Isolate yourself from the noise around you
The press is often a source of anxiety, but it's much worse in these moments. If, like me, you're in it for the long term. Ignore it.
5. Have your resources available.
If you need to convert bonds into stock, to transfer cash from one bank to another. Make sure you can do this quickly. It would be a shame to miss the boat for administrative reasons.
Markets correct themselves regularly and sometimes collapse. Responding without emotion is rational but extremely difficult. Prepare yourself like an athlete and win your next mental battle.
Disclaimer: I’m not a financial advisor. All information posted is merely for informational purposes. It is not intended as a substitute for professional advice. Should you decide to act upon any information, you do so at your own risk. :)