What should you do if you’re fully invested and the market tanks?
The first thing you should do is panic. That’s right I said panic! Run around in circles, flapping your arms and scream, “why, why, why?” Then look for someone to blame, as this surely can’t be your fault.
All done? I hope so, as it’s important to get that futile activity out of the way. If the market does tank you need your wits about you and a solid plan in place.
The 4-step plan
Learn from this mistake. I know you want a solution for your predicament.
But the best solution was to increase cash when the market was riding high. If you had done that, you’d gleefully be cheering on lower prices so you could put that cash to work. This is an invaluable opportunity to learn about the true value of cash.
I know, I know. You still want a solution. You still want an action plan. So here goes.
1. Do nothing. Ignore the market and sooner than you imagine everything will look rosy again.
2. If you’ve got regular income then keep buying good companies. There are many companies being sold at generational lows of between 2x- 5x EBITDA. Update your watchlist.
3. Only sell to buy something better. Market sell-offs provide a good opportunity to upgrade your portfolio. Do not sell out!
4. Focus on value not share prices. If you do that you may see opportunity instead of misery.
Bonus 5th step
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