In today's video, we are going to talk about how to take advantage of
a stock market crash.
It's important to note that while yes, stock market crashes can be
scary and unpredictable, but if we are prepared, then we can take
advantage of those stock market crashes.
All right, let's dive right in.
We are going to talk about how to take advantage of a stock market
crash so you can position yourself for success.
All right.
The first thing we want to do in order to take advantage of a stock
market crash is to stay calm.
A lot of people freak out and they sell their investments, and when
they do that, they lock in those losses.
So we really want to make sure that we are staying calm when a stock
market crash happens.
While these crashes can be painful as we go through them, if we can
keep that long-term mindset, then we are going to be a lot better off
and we can capitalize on these stock market crashes.
To share an experience with you, I have a friend, I was talking to her
at church a while ago and she was saying that she had invested a lot
of her money in the stock market and the stock market did crash, and
she was so nervous that she sold all of her investments, so she
immediately locked in all of those losses.
And of course the stock market did come back up because that's what
the stock market does in the short term.
It goes up and down, up and down, and even really far down sometimes,
but in the long term it goes up.
So unfortunately for it, my friend, she lost out on all of those gains
that would've happened if she had just left her money alone in the
stock market.
By staying calm, we are able to take advantage of the stock market
crash because we are not panic selling all of our investments and
losing out on all of those higher returns that are going to happen
after the stock market crash is over.
And I want to know, tell me in the comments, would you sell all of
your investments if you saw the stock market crash?
The second thing that we can do to take advantage of a stock market
crash is to rebalance our portfolio.
When a stock market crash happens, things get out of whack in our
investment accounts, some investments will be really high as some will
be a lot lower, and we want to take a look at where we actually want
to be with our investments and rebalance our portfolio if we need to
or if we want to.
We want to make sure that we are still diversified in the way that we
want, whether that is having a certain percentage in stocks and a
certain percentage in bonds or just a certain percentage in certain
companies.
When we are rebalancing our portfolio, we can take advantage of some
of the losses that have happened if we wanted to invest more while
things are on sale, and that way we are investing more of our money
while we are getting a discounted price, we can watch for those buying
opportunities during crashes.
And we do want to make sure that we aren't investing money we are
going to need right away because we don't really know how long the
crash is going to last.
But if we invest that money and think we're going to just pull it out
in a year and the stock market is still down in a year, we're not
going to be able to pull out as much money as we had hoped.
So we do want to be careful when we are investing during a crash.
We don't want to think we are going to make a quick win going along
with rebalancing our portfolio, we can also take advantage of
something called tax loss harvesting, and this is selling our
investments when they are down and we lock in that loss, but we can
write that off on our taxes if we have other investments that we have
sold that we have gains on.
For example, if we have a few shares of Amazon and they go below the
price that we had bought them for, we could sell those investments,
those Amazon stocks or Amazon shares and write that loss off on our
taxes.
And then if we had Tesla shares and those went way up, then we could
sell those for a gain and offset the taxes we would be paying on the
gain for those Tesla shares by selling the Amazon shares at a loss.
And of course, we want to be careful when we are using tax loss
harvesting because we may end up regretting selling some of those
investments, especially if they do come back up later.
We may not be able to make up that difference in our taxes because we
could have had even a larger gain and still paid taxes on that money,
but still made more money.
But nonetheless, I want you to be aware of the strategy in case you do
want to use it.
And the third way we can take advantage of a stock market crash is
looking for bargains.
And I know I mentioned this a little bit in step two or part two, but
nonetheless, we can look for different companies or funds that are on
sell that have really good bargains and we know that they are going to
come back up in the long term.
So we can really take advantage of that and buy things when they are
at a discounted price.
We want to make sure we are doing our research, doing our homework,
and feeling comfortable with what we are investing in, knowing that it
will make it through the crash and rise over the long term.
To give you a personal example, when we had a certain pandemic that
happened, the entire stock market went on sale, things went down
drastically, and I was able to take advantage of that.
I put some of my money into the stock market realizing that things may
not come back up very quickly.
I wasn't investing money that I really, really needed right away, but
I was able to put that money in the stock market and luckily things
went back up fairly quickly for what I invested in.
Just keep in mind that doesn't always happen.
And then the fourth way to take advantage of a stock market crash is
to dollar cost average.
This is where you are investing your money at regular intervals maybe
every two weeks or once a month, no matter the price.
So it doesn't matter if the price is high or low, you just continue to
invest at your particular interval and that way you are dollar cost
averaging that price over time.
This can really help to smooth out the ups and downs or the crashes
that we have.
If you are continuing to invest your money over time, you are
capitalizing on when the crash happened because you're still buying
and then you're also capitalizing because you are continuing to buy
even when the price rises.
So you aren't trying to time the market.
You are more about having time in the market.
And this is especially nice during a crash because when the crash
happens, things can drop significantly, but then they can continue to
drop even further and even further.
So if you are buying at the beginning of a crash and you're thinking,
oh, things are on sale, I'm getting a really good deal, and then
things go even lower, but you invest even more, you can think, okay,
the last price that I bought at was a little bit higher, but now it's
even a little bit lower.
And then if it goes even lower, you can think the same thing.
And just keep in mind that over the long term you are going to make
significant gains because you will be dollar cost averaging.
You'll be continuing to invest your money over time.
And as we saw last year the market was down.
I saw that it went down at the beginning of the year, so I put some
money in the stock market and then it went down even further and then
even further.
But I just had my automated investing set up, so I was still investing
every single month no matter the price of the investment, I was taking
advantage of the dollar cost averaging.
And the fifth way to take advantage of a stock market crash is to keep
a long-term mindset.
I've been talking about this throughout the entire video because it is
so important because the stock market crash can be very painful in
that short term.
So if we are keeping that long-term mindset, it is going to make the
crash a lot better for us.
So we can resist the temptation to make investment decisions just
based on the short term.
Like when I was investing, when everything went on sale, I wasn't
expecting things to come right back up the very next month.
I knew they eventually would.
So that's why I chose to invest then.
But I wasn't making my investment decision based on the short term.
Yes, I was thinking, oh, I will definitely make gains when the market
comes back up, but I wasn't hoping that it would come back up within
the next month, and stressed about investing the money I had put in.
And if we are doing that, if we are keeping a more long term mindset,
then we can take advantage of the crashes because if we put money in
and then we see it drop even further, we're not going to be tempted to
pull that money out and lock in the losses.
We will be thinking, all right, I know this is a good investment.
I've done my homework, I've done my research, and I can leave it in
there for the long term and then capitalize on those gains.
And if you are thinking, ah, the stock market just sounds too scary or
too overwhelming, I have a free masterclass where I go into detail
about investing in the stock market and about how you can work with
me.
I will leave a link to the free masterclass in the description below.
You can click on that and check it out.
Comment below and tell me how you are going to react during a stock
market crash.
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Thanks so much for watching.
I'll see you in the next video.