Now is the time to plan your market crash strategy!

If you have only invested in the market in the last decade or so, you would not have been caught in a market crash, and have probably never considered what you would do if one were to occur.

You may now be seeking to control your own financial destiny by building a share-portfolio, perhaps for a retirement nest-egg. In this case, you should not delay thinking about what you would do in the event of a market crash, or risk losing more of your savings than necessary.

You alone must work out a strategy that meets your own needs. Below are a few issues you may wish to consider in doing so:

  1. Should you increase your cash reserves when there is evidence of irrational bullish exuberance in the market?
  2. Rather than wait and see, should you make it a policy to sell when there are technical patterns suggestive of uptrend reversal?
  3. Will you set stop/loss positions for your longer-terms investments, as well as your trades, and how close will you set them?
  4. When and how can you distinguish between temporary pull-backs of the order of 10-15%, from more serious market crashes, possibly of the order of 30-40%, that may take years for recovery?
  5. If you have missed a stop/loss position, is it better to still sell or continue to hold, waiting-out the downturn until the market recovers?
  6. If you have suffered substantial losses, is it better to exit the market altogether, and seek more stable investments elsewhere?

In my investment lifetime I have experienced two severe market crashes in 1987, and in 2008, so have given much thought to these questions.

I will refrain from offering my own viewpoints, and will simply invite readers to come to their own conclusions after due consideration, and to formulate their own policies.

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