Is anyone else tired of stock market crash warnings? I sure am.
So let's get something out of the way. We don't know when the next market crash will happen. It could happen next week, next month, or next year.
Worrying about a pullback isn't a good use of anyone's time and energy. That's why I refuse to lose sleep over the idea of stock values falling. In fact, at this point, I'm actually not doing a thing to prepare for the next market downturn. Here's why.
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I'm all set with savings
During a stock market crash, there's really only one way to lose money -- sell off investments when they're down. If you don't touch your portfolio, you shouldn't lose a dime.
But leaving your portfolio alone is easier said than done when emergency expenses arise and you need to liquidate assets to cover them. And in that situation, it's easy to see why a lot of investors do end up taking losses during a downturn.
Thankfully, I've worked hard to build up an emergency fund with enough money to cover about a year's worth of bills. That emergency fund, to be clear, was many years in the making, and it's also probably far more robust than what the average investor needs.
But being self-employed and therefore ineligible for unemployment benefits under most circumstances, I need a year's worth of money in the bank to pay my bills for peace of mind. And having that cash means I'm prepared in case stock values fall and my income dips or surprise bills pop up at the same time.
My portfolio is designed to withstand a crash
When I first started buying stocks, I began with a handful and worked my way up. Now, I own dozens of stocks across a wide range of market segments. All told, my portfolio does a nice job of encompassing the broad market.
That's why I'm not making any changes to my investments to gear up for a stock market crash. My portfolio is already quite diverse, and at this point, I don't feel like I'm overly exposed to any single corner of the market. That, in turn, buys me some protection during a crash.
Furthermore, stocks aren't the only asset I'm currently invested in. I also own REITs (real estate investment trusts), whose values don't always rise and fall directly with stock market movement.
Are you prepared for the next downturn?
Getting ready for a stock market crash doesn't mean dumping investments left and right. On my end, it simply means having cash reserves in the bank so I don't have to tap my portfolio, and maintaining a diverse mix of stocks and other assets.
If you're worried about a stock market crash, boost your emergency fund if you're not happy with what it looks like and add some new investments to your portfolio if you don't think you already own a diverse mix. Beyond that, there's not much to do. Rather than spend your time worrying about a downturn, learn more about how to be a better investor so you're doing something productive.
