6. Avoid Leverage That Amplifies Stress During A Market Crash:
Sure, there’s stress during a crash – lots of it. Add margins (meaning loans that you incurred to buy more stocks) and you get more stress. Those loans have to be paid – right in the middle of a market crash. Malo.
7. Don’t Try To Time the Market
Don’t try to forecast when stock market crashes will occur. Just know they will come. In Berkshire’s 2017 shareholder letter, Buffett outlined four times when Berkshire stock fell 37% or more. Warren Buffet said that the biggest decline occurred from March 1973 to January 1975, when Berkshire stock declined a whopping 59%. No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow. These pullbacks, which were all accompanied by broader drops in the stock market, are undoubtedly painful for investors. But no matter how much you wish to avoid them, trying to time them is a fool’s errand.
8. Don’t View Stocks As Ticker Symbols
While stock prices may plummet, the majority of companies with good business models and strong competitive advantages will likely see a far smaller negative impact to their underlying businesses during these periods.
9. Stay Focused On the Long Haul
Remain focused during downturns. Don’t get caught up in short-term economic forecasts of sheer optimism or gloom and doom. Long-term investors are not short-term traders. They are business owners with long-term views.
10. The Bottom Line:
Stocks have survived corrections, recessions, and depressions. They will survive them in the future. So, if you find yourself amid a stock market crash, stay out of debt, stay focused on the long-term, and take advantage of buying. Remember: When the going gets tough, the tough goes shopping – for bargain stocks.