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Collin Harness


How do I take advantage of a stock market crash?

The stock market will crash again. It is not a question of if, but when.

With that in mind how to we take advantage of those turbulent times?

It does not happen without careful planning.

    1. Make more income.

    Always be working to increase your income. More income will give you more options.

    More income will allow you to accumulate more savings which people will need when there is a stock market downturn. Most Americans do not save money, rather the opposite they spend more than they market.

    When the stock market crashes the cost of debt goes up and people need cash to cover those debts. That is where you can step in and provide that cash to those people at a favorable return.

    2. Put money into an account earmarked for a stock market crash and let it keep building up.

    First, you should have a money system already set up and be dollar cost averaging into your chosen investments.

    You should also have an emergency fund in case you need money for health or house or lost wages.

    But then it is also a good idea to have a separate bank account for unique opportunities that may arise.

    3. Do your homework. Try to learn about how businesses are valued overall.

    Compare a business to its past performance and stock price over time.

    Compare a business to its peers.

    Compare a business to businesses in other sectors.

    Try to understand the different valuation metics that can determine if a stock or a business is currently being valued appropriately. Watch 'Shark Tank', that show is constantly talking about business valuation and when the sharks believe the business is over or undervalued and how much value they bring to the deal.

    4. Keep a watch list of business you think are expensive, but would like to be invested into. Or may be private.

    Apple, Amazon, Google, Berkshire Hathaway. These are big expensive stocks. But even the largest companies are not immune to a stock market downturn. They suffer just like other people and businesses.

    Keep businesses on your list that you want to buy into more, but might be a little pricey.

    And just because something has a high price today, does not mean the price cannot go hire.

    5. Be patient. Avoid the noise.

    There will be a lot of people screaming when the stock market is going down. They were not prepared for the downturn and blood in the streets sells newspapers.

    People are more interested in bad news than good.

    You have to be focused on finding the opportunities during the downturn.

    6. Understand why the market crashed before making your move.

    The market always crashes for different reasons.

    Technology, real estate, interest rates, viruses, oil.

    There is always a primary cause and then things that suffer because of that primary cause. There are opportunities in both places. Understand the primary cause. How severe is the downturn and how long will it last?

    7. When the time is right, don't deploy all of your money at once.

    Never make one large bet.

    I want you to have conviction in your investment, but you also want to have a backup. There will be multiple opportunities to take advantage of.

    Dont try and time the bottom of the market. You won't know when the true bottom is. Dollar cost average into your bet. You also won't know how long the crash lasts. It may be years before the market recovers. 

    8. Don't bet the farm.

    I don't care how much you are convinced you are right. There are multiple opportunities you can take advantage of.

    Cash flow.

    Make sure the assets that you invest into provides cash flow. That way if you asset does not appreciate in value then at least you received cash along the way. 

    Don't invest money that you will need or take on debt to make the investment. As the market crashes the cost of debt increases.

    9. Form relationships with people.

    Some of my best investments have not come from me doing research or being smart. They have come from other people doing researching. Relationships that I have formed and learn about investments from others. CPAs, lawyers, friends, entrepreneurs, acquaintances etc.

    Always work on building up your network of people.

    10. Don't get FOMO

    You are a leader not a follower.

    Dont worry about the latest hot investment. Crypto is sexy, but it is just one of many investment opportunities. 

    Be patient. Do more research. 

    Create your own convictions. 

    11. Repeat

    There will be many different stock market crashes over your lifetime. There will be small ones and big ones. In different sectors.

    You need to focus on income. 

    Being able to take advantage of those market crashes. 

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