No matter how adept one is in predicting the stock markets or chart patterns, no one can accurately estimate when the stocks will come crashing down. But that doesn’t mean one should not prepare for the worst and once in a while, corrections are bound to happen in the Australian stock exchange. Online traders using platforms like the MT5 will have more response time owing to the reliability of the digital media compared to the traditional trades and investments but even then, it’s unpredictable. An example would be how the global pandemic gave Australia’s stock markets the plunge giving rise to panic sales among traders and investors.
However, being prepared can help take off those jitters when such a situation occurs again. Suffice to say, there isn’t a clear estimate of what might happen so take all the precautions necessary to cushion the blows on the portfolio. Here are a few pointers:
Quality Companies Will Stand Strong During A Plunge: These include nationally recognised industries in Australia with strong balance sheets to withstand any market crash. Companies that pay reliable dividends, that have lots of cash reserves and high returns on investment with little borrowing. Go for funds managing different companies and their performance in the market compared to individual shares.
Set Up An Emergency Fund: About six months’ worth of expenses must be secured for this purpose. It might be a bad time during a recession and people may lose jobs and need a large amount of money to stay afloat. There’s no guarantee of what might happen so a large cash reserve at the ready may help with any problems that might sprout up during that period.
Pay Off All Debts And Mortgages: Although this can come off as quite demanding considering the financial situation of most Australians, it’s still better to pay off as many debts and mortgages as possible. If there are loans taken, try clearing them out too. The stock market crash will bring with it a lot of financial problems and defaulting on loans and mortgages shouldn’t be part of that.
Set Up Order Limits: Traders using online trading platforms like MT5 can set order limits to sell off all the stocks in case the prices plummet. If it does, once the limit crosses the specified amount, the platform automatically sells those stocks preventing the traders from incurring significant losses.
No Place For Emotions: It’s not uncommon to find emotions taking the lead in a dire situation. It’s just human nature but don’t let emotions control the decision-making process here. Rely on calculated risk assessment and strategic planning to help find a way out of a failing market. Chalk up a plan for when the situation arrives and have a strategy set in place.
Diversify The Portfolio: Always invest in a wide range of assets and everything from commodity futures, contracts, bonds, metals, agriculture and anything to mitigate the risks. Diversifying the portfolio allows the trader to evenly spread the losses as some parts of the portfolio will rise while others depreciate.
Investing For The Long Term: Always opt for the long term instead of going after short term earnings. Plan investments in such a way that traders can hold during the down cycle and prevent the turbulent times from taking hold. If the market comes down, chances are it will go back up again after the correction.
Australia’s Tax Laws: There are a lot of laws and loopholes that traders can exploit in the event of a market crash. Read up on what they are and plan the trades accordingly.
