Ep 48: Market Crash Survival Guide

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The Concept:

How should you prepare for a market crash? We’re here to help you get through those tough times with a five-step market crash survival guide.

The Reality of the Matter:

It’s a matter of when, not if, the stock market will crash again. So let’s take lessons we’ve learned this year and from 2008 and apply those to your financial planning. On this episode of the Retirement Reality Podcast, Mike Kojonen shares the top five things you can do to survive a market crash.

“We hope for the best, but we want to be prepared for those tough times,” said Mike.

1) Know how much risk you are exposed to

Most people don’t understand their financial risks, so we use a software program to do a risk assessment for all current and prospective clients. You will get a risk score for all of your portfolios.

2) Protect your gains

As you get older, it’s a good idea to take some money off the table as you make money. In other words, protect your gains. Mike explains how he uses this concept when he plays blackjack once a year.

If you are 62 or 63 years old and plan to retire at 65, what you have today is roughly 90-95% of what you will have at retirement. Why expose the majority of that to the market? Don’t be so risky with your investments.

3) Have appropriate diversification

To illustrate this point for clients, we draw out a three-bucket scenario:

  • Risk money bucket (stocks, bonds, mutual funds, variable annuities)
  • Peace of mind money bucket (checking, savings, CDs, 6-12 months of cash on hand)
  • Guaranteed bucket – has guaranteed 4-5% average rates of return

4) Don’t try to time the market

It can be unnerving to ride the rollercoaster of the stock market, but people who try to time their investments are usually going to lose. It’s better to have a plan in place, and we’ll explain why.

5) Don’t panic

You have to have confidence in your advisor’s plan. In our case, the majority of our clients were surprised how little they lost this year. That’s because many of our clients have managed portfolios that lower their risk.

We have much more advice in the episode, as well as viewer mailbag questions about buying shares of your company’s stock and whether to pay off a mortgage or keep the money in an account.

2:19 – Know how much risk you are exposed to

6:01 – Protect your gains

8:40 – Have appropriate diversification

10:00 – Don’t try to time the market

12:48 – Don’t panic

15:10 – Mailbag: Buy shares of company stock?

16:48 – Mailbag: Pay off house/rental property or keep money in account?

Thanks for checking out the Retirement Reality Podcast. We’ll talk to you again next week.

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