The Motley Fool

ASX market crash survival guide

Shares are being trashed, again. The temptation is to sell everything and run for the hills. Instead, take a chill pill and consider The Motley Fool’s patented sharemarket survival guide.

Down down, shares are going down, with the ASX predicted to fall below the 4000 point level for the first time in 7 months.

As if the euro-debt crisis wasn’t enough, we’re now contending with slowing manufacturing activity in China, Brazil, the UK and even the US.

In the U.S, the S&P 500 (Index: ^GSPC) is now approaching official correction territory, defined as a 10% fall from its recent peak. Friday was the Dow Jones (Index: ^DJI) worst day of 2012, losing 2.2%.

Over the last month, our own S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) index has fallen over 8%, as has the All Ordinaries (Index: ^AORD) (ASX: XAO).  Some shares have fared even worse…

Company One month % Share Price Fall
BHP Billiton (ASX:BHP) (11.8)
Rio Tinto (ASX:RIO) (15.6)
ANZ (ASX:ANZ) (11.5)
Woodside Petroleum (ASX:WPL) (11.7)
Fortescue Metals Group (ASX:LLC) (19.5)
QBE Insurance (ASX:QBE) (10.9)
Santos (ASX:STO) (16.5)
AMP (ASX:AMP) (11.5)
Leighton Holdings (ASX:LEI) (13.4)

Just to prove it’s not all doom and gloom, some dividend-paying stocks have risen over the past month, including M2 Telecommunications (ASX: MTU), Telstra (ASX: TLS) and Woolworths (ASX: WOW).

That said, it has been a tough time for investors.

So what are the keys to surviving market downturns? Here are some suggestions:

1. Don’t get absorbed in despair and panic. Ignore the violent emotional swings, and instead simply maintain a degree of detachment with regard to the whole business.

2. Be a regular saver and investor. That way, a market downturn becomes nothing more than a buying opportunity.

3. Reflect that Anne Scheiber, the U.S. lawyer who invested $5,000 in 1944 and died in the mid-1990s worth over $20 million, never sold a share and invested only in common, easily understandable companies. To her, we must presume, market fluctuations were an irrelevancy.

4. Finally, stop buying the newspapers, don’t watch the TV and go away on holiday. In short, switch off the market. Life’s too short for all that hullabaloo.

(As an aside, if you are worried about the market crash, you might want to first check out our new free report, Read This Before The Market Crashes. It could save you hours of heartache, and thousands of dollars. Click here to request your report now, whilst it’s still free and available.)

When bearish volatility, caused by emotions and a lack of reason, leads humans to herd, sharemarkets become irrational and oversold.

That irrationality allows investors who are able to control their emotions and act in a calm, balanced manner, to take advantage of the many opportunities the market throws up.

There is no need to make big decisions. You don’t  need to be fully invested in, or totally out of the market. Gradually building positions in the best companies while maintaining a cash cushion will make investing easier and less stressful.

Stock market falls are like the seasons of the year. They are a natural part of the investment landscape, they are normal and can even be very healthy.

This latest crisis, like all crises before, will pass. And those that survive will prosper.

If you’re in the market for some high yielding ASX shares, look no further than our Secure Your Future with 3 Rock-Solid Dividend Stocks report. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

 More reading

The Motley Fools purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Bruce Jackson has an interest in BHP, ANZ, Telstra and Woolworths.

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