The 1987 stock market crash known as “Black Monday” wiped out fortunes as many investors lost their life savings. Those of a generation that existed back then will know all too well what can happen when you put all your eggs in one basket like many investors did. I mean there were stories of investors borrowing money to buy stocks using the value of their shares as collateral. When the markets went down, the value of their shares was a fraction of the money owed for the money borrowed.
The crash of 1987 was the worst since the Wall Street Crash of 1929. There were almost 60 years between 1929 and 1987, so investors need to make sure that there will not be another crash in its lifetime.
So what should investors do when markets are falling?
These are my 5 tips:
1 KEEP CALM
Don’t charter, the markets go up and down like a roller coaster. Treat the markets as a long-term investment. If you are young then you have time on your side. There is time for you to recover from financial setbacks. Even if you are, say, 50 years old, you still have another 15 or more years to go before you reach retirement age, so you don’t need to be too conservative. However, someone who can’t stand the idea of markets falling rapidly would disagree. It all depends on your temperament.
A financial advisor is likely to guide you toward more conservative investments if you’re approaching what’s called “retirement age.”
2 FOLLOW YOUR FINANCIAL PLAN
It is important to stick with your original plan despite the negativity in the papers that will undoubtedly follow an accident. When planning your financial strategy, your plan must take into account the possibility of a stock market crash. Stocks can take investors on a rollercoaster ride that rewards persistence.
3 DO NOT TRY TO TIME THE MARKET
It is time and not time that rewards stock market investors. Few investors have the knowledge to predict the price movement of a stock and those who do and take advantage of it are breaking the law because it is known as insider trading. Investors should do their homework first and trust their own judgment when deciding which stocks to buy.
4 KEEP SAVING AND INVESTING
The market rewards consistency. Investing in the markets when there is so much negativity that will follow a crash will pay off. As they say “Fortune favors the brave”. The advantage of investing when there is not a lot of negativity and uncertainty in the markets is that you will be able to buy stocks at bargain prices and as the market recovers investors will gradually jump on the bandwagon and in doing so give you a chance. in the arm
5 LISTENING TO THE RIGHT PEOPLE
A stock market crash will dominate the news for weeks, and out of the blue financial experts will appear with advice on what to do with your money. An intelligent investor will be able to discern between good, bad or downright stupid advice.
