Market Crashes: How to survive the crash
Explaining how to handle a market crash when it occurs and what to do in order to come out of it alive
You never want to deal with them, but they’re just a part of life: market crashes. Investing can be pretty eventful if you’re in the right industry, so when it comes to cryptocurrency and blockchain, you can most definitely expect your own fair share of market movements and price fluctuations. As such, you should also be prepared to take on a market crash, irrespective of how much you have already prepared for it. It’s easy to get lost and panic when a market crash hits, so let’s go over what you should be doing to thrive during a market crash.
This is not financial investment advice.
This article will touch upon key aspects of what one could do to effectively combat a market crash.
Don’t Keep Checking Your Portfolio
If you happen to find yourself caught up in a market crash for whatever asset class you are participating in, the first and most important thing to do is not to panic. A big mistake that a lot of inexperienced investors find themselves making is frantically checking their portfolio to further assess the damage that’s being done. Had you properly prepared for the crash, then you shouldn’t be worrying about the damage that’s being done since you already have a healthy diversification of assets.
With that being said, you can’t help but feel a little upset or discouraged at the fact that you may be losing a large amount of money in such a short period of time. Yet, when the market is officially considered “crashing” and is quickly plunging prices, there’s no point in continuously checking your portfolio every hour to see how far it’s dropping. When the market’s crashing, constantly checking how much money you’re losing acts as a negative feedback loop that makes you panic, which in turn makes you want to do something (and it’s usually the wrong something).
If you can see yourself making this mistake or even find yourself continuously glued to your screen checking portfolio values, do yourself a favor and try to combat this bad habit. One way to effectively abstain from over-checking and panicking about your portfolio is to give your credentials to someone else temporarily. However, this doesn’t mean that you should be giving out your private keys to everyone. Instead, have someone configure parental controls to block your ability from even accessing these sites. This way, you’ll be restricted from checking your portfolio and enjoy your time without over-stressing or making irrational decisions.
The first thing to do is take a deep breath and calm down. Don’t panic and make any irrational decisions which you may regret in the future. Restrict any access from checking your portfolio so that you can maintain our peace of mind.
Go Against The Crowd
Who said that you can’t thrive during a market crash? As it turns out, you can actually come out of a market crash with more money than you did when it started if you play cards right, of course. Remember, the key to investing is seeing the largest growths possible for the assets you own, so when the prices are nearing their lows, you should actually be looking for an opportunity to introduce new cash positions instead of selling the ones that you currently own.
Think about it from a much broader perspective, as we see investors selling much more of their assets than they are buying them. These are most likely the same people who got involved when the prices were on their way up, resulting in them selling when prices are low. This the exact opposite of what you should be doing, yet we still see the same incorrect investing patterns take place during each market crash. This is where you, an intelligent investor, can actually come in and make money during the crash.
Investing mogul Warren Buffett said it best when he reminded us to be “Fearful when others are greedy and greedy when others are fearful.” This same lesson can be applied here, as market crashes serve as a kind of discount sale of the same assets which you would purchase anyways. If you are purchasing assets when they are near their lowest prices, then you theoretically have the most room for growth and in turn, have the opportunity to secure the largest returns once the market recovers. For some investors, market crashes are exactly what they want to see for the possibility of long-term gains.
Market crashes result in relatively low prices for the assets you would otherwise already invest in. So while everyone else is selling low, take advantage of this and buy low so that you can sell the highest.
Think About The Future
A huge part of surviving a market crash is being able to prepare for what follows. You know that most markets tend to recover following a market crash, so you should be thinking about how to best position yourself for the years after the market crash you’re currently in. To do this, be sure to take advantage of the low prices and introduce cash positions during a market crash to ensure that you are in a good position when it ends.
For the most part, these markets have not only survived but thrived despite disease epidemics, financial crises, natural disasters, terrorist attacks, wars, low inflation, high inflation, low debt, high debt, booms, busts, recessions, depressions, and on and on. This is reflected in the overall direction of the market, which is up, and there’s no reason that won’t continue for the next decade and beyond. So don’t get discouraged, sell all your assets, or just give up on investing that particular asset class. Every market crash brings a great opportunity to make money as well as learn from your mistakes to prepare for the future.
No matter how severe a market crash is, the economy will always recover and continue to thrive as history has shown us. So don’t get discouraged or panic during these times, as you should really be using it to prepare for the future.
For a majority of investors, market crashes are extremely negative and can lead to panic and irrational decision-making. However, if you are aware of how to survive a market crash, these periods of low price climbs actually present a compelling investment opportunity based on low asset prices and large rooms to grow. If you have the ability to purchase these assets at a low price, then you actually will have the most room to grow your investments and in turn make money once the crash subsides. When everyone else is frantically selling their assets, be greedy and go after these discounted coins, stocks, or whichever asset it may be, as you’ll end up having the most potential for long-term growth.
What do you like to do when you are in the middle of a market crash?
Let us know why in the comments!