Market Crash Checklist: How to Stay Safe
When the market crashes, it impacts everyone in some way or another. With television news getting louder, prices dropping with a freefall, and a kind of panic situation, every investor will get confused about their next move.
For example, the 2008 financial crisis led to the collapse of global markets and the failure of many big institutions.
Similarly, the sharp market downfall in 2020 (during COVID-19) saw the market drop below ever before.
In both of these market crash examples, those who had plans felt stable than the others who reacted emotionally.
Diversify Your Cash Holdings
Rather than keeping your cash holdings together, make sure to spread them across a few safe places. The money should be easily accessible, even if one spot faces issues.
Check Your Insurance Coverage
Always keep a keen eye on your health, life, and insurance during market downfall. Having effective coverage will save you from unexpected expenses later.
Consider Downsizing Unnecessary Expenses
Check the monthly expenditure and assess which small ones you can reduce during the market crash. Cutting down additional expenses is a smart move to survive market volatility.
Check Your Cash Savings
The first and foremost thing is to check your savings available for the day-to-day expenses. Just a simple question to yourself, like “if the market keeps on going down for a few months, do I have enough to manage expenses?” can help a lot.
It will save you from later troubles when the market will actually crash around you. The cash savings will serve as a backup and won’t let you face an immediate cash crisis.
Review Your Emergency Fund
Do you have an emergency fund that can provide safety? Check where your emergency fund is available, like a liquid fund or a savings account. This amount should be a risk-free investment with immediate accessibility. For example, in the market crash of 2020, with a drop of around 30%, people with a strong emergency fund felt stable.
Note Any Near-Term Expenses
It’s essential to list down all upcoming big expenses in the next few months. These expenses can be rent, fees, travel, or more.
It will help in planning your finances beforehand, so you don’t end up selling your investments at low prices. With proper tracking of expenses, you can already be in control without making forced decisions.
Check Your Loan and EMI Pressure
EMIs and loans are fixed payments irrespective of whether the market crashes or not. With heavy EMIs and loan repayment schedules, the market crash can feel too heavy.
Just having better insights and planning related to such monthly payments can help you stay prepared. In case of market downfall pressure, proper EMI understanding and planning can provide more control.
Spot Your High-Risk Investments
Everyone’s portfolio includes some investments aggressive than others, and you need to find them. Such investments are impacted a lot during a market crash.
Instead of making any changes in high-risk investments, you should know them to stay mentally prepared.
Review Your SIP or Auto-Invest Settings
Always check your SIPs or other auto investment plans and decide whether you want to continue them during the crash as well.
It completely lies on you to stick with or leave your SIPs. You need to have proper clarity and confidence that you can manage them during a crash.
Test Your Account Access
The trading websites or apps often get slow or face issues during a market crash. Make sure your app password or PIN is set properly with two-factor authentication.
Fix Your “Do Not Touch” List
You should have the clarity for which investments are not to be touched during a market crash. Such investments can be retirement money, education savings, or other investments you have been holding for many years.
Conclusion
A market crash is bad news for everyone, yet being prepared will help you to survive. Hopefully, the above shared simple checklist can help you focus on what truly matters.
For More Information: Download Stockyaari App Now
Standard warning: “Investment in securities market are subject to market risks. Read all the related documents carefully before investing.” Disclaimers: a. “Registration granted by SEBI, enlistment as RA with Exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.” b. “The securities quoted are for illustration only and are not recommendatory.”
This analysis is for informational purposes only. Please consult a SEBI-registered financial advisor before investing.
– Chandan Pathak
Equity Research Analyst, StockYaari