July 30, 2019 The stock market crashes. What do you do?
If you’re invested in the stock market and have had your ear to the ground, you’ve no doubt heard rumblings from Wall Street and major news outlets of the potential for an economic downturn.
You keep hearing things like “the property market’s down another 20 percent”, “the global equities market’s bull run’s over”, “the United States’ trade war with China’s going to rip the carpet out from underneath the Australian economy” – the catchcrys go on.
Which is fair enough, given that 2007-08’s Global Financial Crisis is still well and truly in the rearview mirror.
To be fair, the Australian property market’s incredible fall aside, both the Australian and global economies have been on shaky ground ever since.
Okay, so let’s join the doomsayers for a moment and, with our crystal ball, let’s entertain the idea that, come December, the market’s hypothetically going to go south.
Now let’s say you’re still paying off the family home and an investment property, which you’re currently renting out, and you have a decent amount invested in the share market.
What do you do? Better still, what can you do to shore everything up?
Diversify your folio
If you’re not already, make sure your investment portfolio’s diversified. In other words, make sure you diversify your investments to minimise your risk exposure.
Check out my blog article from November 2018, where he talks through diversifying your risk in more detail.
For example, if your folio’s out of balance in a particular category, like Australian equities, maybe spread your risk a little further to reduce your exposure if the market tanks.
Get your debt and credit in order
There’s a bit of a credit crunch at the moment with banks having tightened lending over the past 2 years. In saying that interest rates are at record lows!
If you’ve got a variable rate on your mortgage, maybe consider bunkering down for a few years and paying back more than the minimum payment.
Think about it as setting your self up for down the track, at some point in the future the RBA will send rates north, all be it in the medium to long term.
The reason being is that, in this hypothetical scenario, a sharp rise in interest rates would lead to a potentially tough lending environment. Even if you never ended up needing to draw on that credit, it’s better to have it up your sleeve in a downturn than not.
Make sure your super’s not exposed
If you’re not up to speed with what options you’ve opted for with your superannuation, now’s the time to double check. In other words, you want to make sure you’re taking a much more conservative strategy with your super to help weather a potential storm.
So many people I know, particularly close to retirement age at the time, lost considerable amounts of their nest eggs off the back of the GFC.
Many of who are still working and playing catch up when they would’ve been comfortably retired by now with their feet up.
If you are concerned about the way your investments are structured, feel like you need to shore everything up or are unsure how your superannuation’s structured, feel free to give me a shout, and we can look into everything for you.