7 Simple Strategies to Protect Your Stock Market Gains From a Crash

If you own stocks, especially stocks for companies based in the United States since the bull market began back in March of 2009, then give yourself a nice big pat on the back. In just under a decade, Standard & Poor’s 500-stock index has produced an annualized total return of nearly 23%. That means a $10,000 investment back at the start of the bull market would be worth about $35,000 today. Many investors have had to learn the hard way about what happens when the market crashes, and it has costed many of them tens of thousands of dollars as well. Follow the 7 simple strategies below to protect your stock market gains for a crash.

  1. Hold Cash – Having cash on hand is important in order to take advantage of market volatility. It also never hurts to have a rainy day fund should something happen with your job or other source of income while investing.
  2. Have A “Buy List” – Do your stock research upfront as if you were buying it today. This way if the stock does crash in a recession, you already know the business well and can capitalize on the opportunity right away.
  3. Always Have A Clear Head – One of the worst things you can do when the market starts going down is sell your shares in a panic. Many investors do it, but as the great Warren Buffett has said “you want to zigg when other’s zagg!” When others are selling you should be looking for good buying opportunities.
  4. Realize That Downturns Aren’t Forever – Despite what anyone else may have told you, market downturns never last forever. They can be painful to see (especially to your wallet), but market downturns tend to be temporary and never usually last more than 18 months.
  5. Tune Out The Financial Media – Financial media outlets have a certain way of getting people to do things they wouldn’t normally do. Remember, the financial media makes their revenue from good stories, so that’s what they’re always looking for. In reality, the financial media isn’t really concerned about your wallet or financial portfolio.
  6. Prepare Yourself Mentally – The best way to protect yourself during a market downturn is to already be prepared for it. If you’re in the right mental state then seeing the market turn shouldn’t send you into a panic. The winners are those who have the highest emotional intelligence and patience.
  7. Recession Proof Your Portfolio – There may not be any way to fully protect your portfolio from a crash. However, consumer staple stocks generally hold up during recessions. When the country is in a recession they may be spending less income on unnecessary expenses like eating out. But, they will still need shampoo, toothpaste and other consumer products that get us through each day.

By following the 7 strategies above you should be able to prevent huge losses should the market take a turn for the worse. Don’t be one of those investors that has to learn about this the hard way. Instead, follow the strategies above and keep yourself protected!

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