Over the last twelve months I primarily swing trade which allow me to keep plenty of available cash on hand. How are you preparing for such a day?
If the market dropped today, I would change nothing. If you're talking about a full-blown crash, I'd wait for evidence of a bottom and hop back in to stocks.
The first responder to this thread claims he would use the same strategy in the current, high riding and active market as he would use if the market suffered an extreme drop. With all due respect, I think that is an unwise strategy. If the market dropped, all of a sudden, my strategy would be: Double down on lesser expensive low dollar stocks (not penny stocks), probably pick-up GBTC at half of where it is now and long one of the major airlines, maybe AAL. In addition to this strategey I also have May 27th on my calendar as thats the date when Trump's executive order sunsets on the 30+ Chinese companies that suffered the investment ban. I especially like the two major Chinese phone giants China Mobile and China Unicom.
You mischaracterized what I said. You were unclear about what you were talking about. I view a drop as just a normal little pullback of a few percent. That's why I gave you an answer that if it was just a normal drop that we see every week, I wouldn't react too strongly. If what you meant by drop was a full-blown correction or crash, I'd be out of the market, wait for evidence that we've seen a bottom, then hop back in to stocks. Basically what I did for COVID crash back in March. I was out sitting 100% in cash in February. I hopped back in after about two weeks of seeing the bottom was done.
I'm a value investor so my process is unlikely to be interesting to anyone here but I will share. I buy stock based on value, which is indirectly related to price. So, a market drop could trigger a substantial buy for me, if the drop is also substantial. I plan to sell stock based on value, also. While I don't generally sell, I have no plans to take my current portfolio to the grave so I will sell the companies I feel have a combination of the least value and the least opportunity for growth. In early March of 2020, I had a lot of cash. Most of that cash was used to buy value stock in the first week of March. It was a great month for us. The cash on hand did not come from selling stock. It came from dividends and new cash into the portfolio. When the market appears frothy, I let cash build. As an investor, I'm looking for strong assets that pay a reasonable dividend that can be purchased at a reasonable value. Once I own the company, I look at it as a partnership. I do not sell because the price is going down or I'm worried about a crash. I try to have the identical outlook to being part of a family run air conditioning business, when climatologists predict a particularly cold year. l wouldn't sell the business but I would work on keeping inventory low and minimizing costs to ride out the slump. The point is to take the good years with the bad but only if the general outlook is that, on balance, there will be mostly good years.
