Nobody wants to think about falling stocks in 2020 the way they did. back in marchbut the reality is that we just don’t know what the pandemic is preparing. If the number of cases rises sharply, or bad news vaccine front, stocks may react negatively.
As someone who has invested in this trial, I am worried about another market crash, but I am also preparing for it. Here’s how.
1. I am increasing my short-term cash reserves.
We are in recession… This means that it is safe to work outside the window. This way, I try to accumulate more cash so that if my workload decreases, I have cash reserves to use when my bills are due.
Image source: Getty Images.
I also spend less during the COVID-19 pandemic. I refuel my car once or twice a month instead of one or two a week, I don’t eat as often as I used to, and the only vacation I plan is hiking, which costs next to nothing. I plan to take some of this unused money and put it in the bank. If I need cash to pay bills, it will be there, and I won’t need to touch my portfolio to access the money if my income declines.
I am also increasing my money pile so that if the market drops, I can buy quality stock at a discount. I used this strategy during March and April, and it allowed me to buy several stocks from my personal watchlist that were previously too expensive for me.
2. I delve deeper into my investment portfolio.
Since we don’t know what the stock market is going to be like for the rest of the year, I look at my portfolio and make sure I like what I see. In particular, I look at several key areas:
- Diversity: Have wide range of shares always important, but especially during a recession. I try to make sure that I don’t invest too much in one market segment.
- Loss of investment: Some companies perform poorly from time to time. I watch the laggards in my portfolio because I can try to sell them at a loss. This way, I can use the freed up money to buy high-potential stocks if their value drops sharply. Also, losing can really help me from tax perspective…
To be clear, I value my portfolio quite often no matter what, but since the stock market crash is on my radar, I will be paying special attention this time.
Hope for the best, but prepare for the worst
I cannot predict what the stock market will face before the end of 2020. This is why I am willing to spend a little time and effort preparing.
Would I like to take a couple of weeks off from cooking and order takeout every night? Absolutely. But I also know that saving money right now can do me a good job if the market seriously changes for the worse. While it might be easier to simply assume my portfolio is in good shape, taking the time to do it will help me better withstand the new downturn.
Of course, I hope the stock market ends the year strong; 2020 owes us at least that much. But I also want to be prepared for the opposite to happen eventually.
