As I was reading a recent issue of the Wall Street Journal (WSJ), I came across an article with the same title quoted above, and I was curious how the writer would turn their fear mongering title into a balanced analysis with sound advice for investors. The advice never came. In this volatile market activity, many investors do actually want to know how to “survive a market crash”, so I’ve outlined  6 useful tips to help you through this tumultuous time in the markets.

1. Don’t let the media influence your investment plan. Boring article titles don’t draw viewers and readers in, and since the media makes money from viewership, it needs click-worthy titles. So during times like these, it’s very common to see headlines such as “it was the worst September for stocks since 2002” (Yahoo Finance) or “how to protect your 401k from a bear market” (CNN Money). The truth is that if your portfolio is diversified and based on a solid financial plan, then short-term volatility should not deter you because a financial plan creates a portfolio that helps you meet your overall goals while matching your risk tolerance.
2. The risk/reward proposition of day trading seldom leans in your favor, especially with money that you cannot afford to lose. You might get lucky with a few stocks, but on average, you will have more losers than winners.
3. Your risk tolerance should be based on sound analysis formulated from a comprehensive financial plan and not positively correlated with the stock market. Time and again, we see investors wanting to take more risk when the market is peaking and avoiding risk when the market is down. Instead, when the market is at its peak, stock allocation should be rebalanced by selling; conversely, when the market is down sharply, stocks are on “sale” and it’s a great time to buy.
4. Quality investments always recover, they just need time. The S&P 500, Dow Jones Industrial Average, NASDAQ, Russell 2000, and other major indexes are solid investments that have withstood the test of time. These major indexes have experienced world wars, major recessions, terrorist attacks, most recently pandemics, yet they continue to increase over the long-term because they are made up of thousands of companies from all sectors of the economy. Dinner party stock tips experience short-lived booms and while they do make the lucky few money, most end up catching the wave when it’s too late and end up losing money.
5. There is no substitute for a solid, comprehensive financial plan tailored to your unique needs and goals. The financial plan will help you stay focused and not tempt you to change strategies based on emotion and loud media influence.
6. We’ve said it many times before and always will, no one can time the bottom (or the top) of the market. Everytime there has been a major dip in the market, we strategically buy on behalf of our clients. And even when stocks go down, it’s not a cause for alarm because it provides the opportunity to buy quality, “beaten down” assets. We are confident that buying good solid investments now will pay off in the long run.

So how do you survive a market crash? Stick to your financial plan. If you’re still in the accumulation phase of your career, it’s a good time to buy stocks on sale. If you’re near or in retirement, your portfolio should already be conservative and may not warrant changes. If you haven’t reviewed or updated your financial plan in a while, it’s time to revisit it with your trusted financial advisor. And remember, stay the course.

Looking for an independent fiduciary financial advisor who can advise you on investments, retirement, real estate, alternative assets, and taxes? Contact ACap Advisors & Accountants to schedule a free initial consultation. Our clients include individuals, small businesses, entrepreneurs, and anyone serious about saving and investing for their future.