Stock Market Crash - How To Prepare & What To Do (Avoid These Common Mistakes)

The stock market is going to crash, it is inevitable. In this video we're going to debunk some stock market myths and look at the best ways to prepare for a stock market crash.

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# How to recognise a looming stock market crash
# Don't worry about timing the market
So if you're worried about the market being at an all time high (which it definitely might be), remember that even if you only buy at the all time highs right before the crashes, you'll still be substantially better off than if you left your money on the sidelines in a standard savings account, as long as you don't sell! But the best thing to do by far, is to consistently add to your investments over time, regardless of the current price, as this will even perform better than the world's best market timer! The simplest way to do this will be through using an automated investing tool.

# Evaluate your current risk level
Now that you know that timing the market over the long run isn't actually a big deal, the next thing you should do to prepare yourself for a potential stock market crash, is to evaluate your current risk level. What I mean by this is, that you should only ever invest what you can afford to lose. As with any investment there is always the possibility it goes to 0. If you're investing in a broad market ETF, this chance is in all likelihood close to 0, and if we ever see the S&P 500 go to zero, well, we've got some really big problems, way bigger than our own personal stock portfolio.

# Have an emergency fund
Which brings us to our next point on how to prepare for a market crash, and this is to always have an emergency fund set aside.

Now for those who don’t know an emergency fund is really just the money you set aside to only be used in case of - you guessed it, an emergency, where you have no other place to turn. And ideally the size of this emergency fund should be equivalent to three to six months worth of your living expenses and kept easily accessible for obviously, emergencies.

# Make sure you are diversified

In terms of being well prepared for a market crash, one of the most important things you can do is look at your portfolio and see if you are well diversified. Sometimes a market crash might actually only effect a certain area of the market, or have a larger effect in a particular industry or sector. This effect is only magnified if you're invested in individual companies!

# What to do if the stock market crashes

Now imagine we've done everything on this list and we're really prepared for a stock market crash and then finally we find ourselves right in the middle of one, like the most recent COVID stock market crash. What should we do now?

The best thing to do during a stock market crash is to stay the course and continue on your automated investing schedule and remember the law of large numbers, where over the long run you, like the casino, will always come out on top.

All opinions expressed in the video and this description are for entertainment only. You should consult a licensed professional before buying any securities, stocks, cryptocurrency or digital assets. Everything in this YouTube channel is for entertainment only.

[GhanYt]

You should make a content on how to earn 6 figures in monthly profits cos I've been reading about investors making up as much and I'd really love to know how to such substantial profit in this current market

[vincentmccall]

Watched and liked, thanks! Every time there’s a small correction in the market all the YouTubers come out with doom and gloom videos. Best advice? Turn off all the videos, stay diversified, and live your life. I do 50% dividend and 50% real estate.

[GabrielOLIVEIRA-fmdw]

Thanks Michael. Your way of explaining things is simple and very easy to understand. 👍🏻

[bluewhales]

Hey Michael, wondering if you had any thoughts on newer/more thematic ETFs like HACK and HGEN?

[iamdedlok]

Good to have you back and active Michael. I had missed your videos.
I have 2 months worth of videos to catchup on looks like!
Yea 6 months emergency fund. check.
setup regular investments. check.
Thanks for educating the layman about how to think about Finance.

[SaratSasidharan]

Hi Michael, thanks for your upload and they are super informative...I have a request, please....could you please make a video on best free Dividend tracking app

[misschristiner]

Great video as always! Can you do a video about the best ETFs to ensure a diversified portfolio? Thanks!

[JakeMarcin]

Really great sound advise as always.
Something you really do need to hear every now and then to just keep you steadily investing and not go astray

[bris]

such a clear explanation! thank you so much!

[gmiha]

Hey Michael - I’d love to see you do a video on investing in trading vs paying off a mortgage early or using things like offset accounts. Given that interest rates are quite low I think it would be a compelling video to get your opinion on this !

[markmonfort]

Kyosaki is a permabear... I take anything he says with a massive grain of salt.. that said, you're spot on with diversification and and not trying to time the market. People need to not panic.

Not sure if you've seen Morgan Housels talks on this kind of stuff but its along these lines too

[cynthiakk]

Wonderful video about share market and full of valuable wisdom.

[charltongunn]

Hi Michael, I am wondering whether you can take out cash advances on margin loans in Australia? Thank you!

[amyhudson]

Sensible advice everyone should be taking 👏. Love your videos and the simple way you explain things.

[Ryan-dzjo]

Thanks Michael, might be worth acknowledging age plays a factor in investor worry and some investors understand the S&P is not immune from a lost decade. Also the size of your emergency fund might change with your age and asset allocation.

[siredith]

Market timing is crap! Unless you are a psychic, don’t try it. Patience and calmness is the key. The power of acculation is underestimated. ALWAYS have cash on hand for when things go bad because that’s when you accumulate.

[adisonmok]

Love your work mate! great sharing.

Agree the best investment term needs to be as long as possible to allow the growth, in the past I was thinking 10+ is long enough but after reading a couple of book the best is "hold even longer"

[siredith]

To prepare for a crash: diversification, diversification, diversification

[gregclifford]

The old saying goes, when the UBER driver is giving you stock tips its time to worry.

[grg-c]

Not being invested in the Crypto market means you are not spreading your risk. Everything in moderation my friend.