Getting Ready For The Next Big Crash

On October 19th, 2017 the Dow Jones plummeted 508 points, making it the worst stock market crash ever. This happened on a Monday and some have nicknamed it Black Monday (no relation to black Fridays) and it has the distinction of being known as the worst single day for stock brokers. As for the brokers who were into short selling, it was a great day. Stockbrokers who were working at the time tend to remember it well.

One of the interesting things they remember is that the months and days leading up to the crash were like riding a roller coaster. Starting roughly two months prior to the crash there were frequent upward and downward trends, sometimes in a single day. Despite all this, no one had guessed what would happen on that terrible day.

The bewildering fact about all of these events was that there were no tried and tested reasons to make this happen. Usually what makes stock markets crash is political turmoil in an important country or some major policy change and other reasons could be currency collapse or overvaluation of equities. What followed was chaos as brokers scrambled to save whatever they could.

There are ways to protect oneself from this kind financial rodeo and that would be to diversify as broad as possible, look for quality stocks, allocate assets properly and have a good reserve of cash. Having cash accomplishes two things. First, see it as buying insurance. If things go south on you, you have something to rest on. Second, it can be used to take advantage of a future bear market.

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