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Tips on Protecting Yourself from Stock Market Crashes

Image courtesy of Alper Cugun
Image courtesy of Alper Cugun
If you hold shares then the stock market crashing can be your worst nightmare. You may live in a country where the market is prone to crashing every few years and worry about it a lot or you may just generally be concerned about the risk. There are things that you can do though, to stop it affecting you so much.

Invest Elsewhere
If the stress of the stock market is really bad then you could take your money out and invest in something else instead. Many people do panic when it crashes and buy gold which they feel is more secure. Other people have decided that housing is a better place to put their money and invest in that instead. However, investments are always a risk and so if you want to be panic free, then you will need to put your money somewhere really safe, such as a savings account or bond, where the amount of return you get will be very small.

Buy when prices are low
It is really important to take advantage of a stock market crash and buy shares when the prices are low. This could be a gamble because there is no guarantee that the shares you buy will increase in value. However, the stock market does go up as well as down in time, so if you buy a range of shares then it is very likely that some will increase in value, particularly in the very long term.

Keep investments long term
It is so important to keep your money in investments in the long term. They will fluctuate a lot but over time they will usually go up in value. Although the stock market may not have done so well in recent times it does usually go up a reasonable amount each year and it can be a good investment compared to other options. All investments should be long term though, as their short term fluctuations could mean that the money that you invest will be worth less when you withdraw it than when you put it in.

Spread the risk
It is worth making sure that you spread the risk when you are investing. If you put all of your money in one area and that does not do well, then it could mean that you lose everything or get back a lot less money than you put in. However, it can sometimes seem that if you do not put in enough money then it is not worth bothering at all. This is where unit trusts and managed funds can be helpful and are therefore worth looking in to, although management fees can be quite high. It is important to understand that when the stock market crashes some areas will fall more than others. This will mean that if you have a spread of investments, then you may not be so badly affected. Of course it all depends on which specific items you have invested in but a bigger spread will mean a lower risk.



Rachel Henderson is a professional freelance writer from the UK. She writes on many subjects but specialises in personal finance. As well as contributing to various blogs and websites she has her own website tracking her own money making process and sells her books through

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