Do This Now Before The Stock Market Crashes in 2021

A pessimist is never disappointed

The stock market is out of control.

After the S&P 500 lost more than 30% of its value during the early stages of the coronavirus pandemic, the market made a remarkable recovery and ended the year at a record high.

In 2021 the market climbed even higher. Stocks like GameStop rocketed 2419% since the pandemic months and Bitcoin reached record highs last week. Then silver started to grow, and pot stocks even went on a tear.

Everything is just too perfect.

It’s like we forgot that nearly 13 million Americans were unemployed in September. That’s about 7 million more workers than pre-pandemic levels. We’re also brushing under the rug that the U.S. printed one-fourth of U.S. dollars ever created during last year alone.

Investors from the dot-com bubble of the late 1990s first started raising alarms about a potential bubble in 2021. Then Warren Buffett’s favorite market indicator signaled stocks are overvalued and a crash may be coming.

I believe a crash is on the horizon, and these are the steps you can do to best prepare yourself.

Have cash on hand

Crashes are a great time to invest more money.

The market is essentially on sale. You’ll find that even top companies will be undervalued due to the market’s overall value being brought down. Furthermore, there are some stocks that perform better coming out of an economic recession.

Here are a few that I’m looking at:

• Pinterest: Stock market crashes cause us to stay home and budget. Pinterest is one of the fastest-growing social platforms and continues to benefit from our current at-home society.
• Costco: One of the most sought after destinations during a recession. I’m just praying they have toilet paper this time around.
• Wheaton Precious Metals: Gold is sometimes called the “real fear index.” It’s a hedge against uncertainty and inflation.

Dollar-cost Average In and Out of Stocks

With everything so low during a crash, it’s very tempting to drop all your money into a few stocks. However, what happens if a better price is available a month or two down the line? What if you picked the wrong time to invest?

My friend Cody Collins wrote about this recently — you need to “dollar-cost average” into a stock. This means investing a fraction of your money into an asset and waiting a period of time [hours, days, or even a week] before investing again.

You can also dollar-cost average out of a stock.

This means when the stock starts booming and you don’t think it will last (Think GameStop or AMC for example) then you’d sell a portion of that investment off periodically to make sure you don’t lose out on profit.

It’s impossible to time the perfect investment, but dollar-cost averaging helps.

Stick to Your Plan and Don’t Look at Your Portfolio

I lost $1000 recently because I didn’t stick to my investing plan. It was a painful mistake because if I listened to my original judgment, I never would have lost that much money.

A good investment plan can save you during a crash. You can define how much cash you’re willing to spend, what stocks you want to invest in, and what price you’d like to get them at.

Furthermore, don’t let wild negative gains affect this plan. Many people make this mistake when Bitcoin drops. They panic sell and lose a lot of money because the red color on their brokerage app scared them away.

You don’t lose money on an investment until you sell it off. So, stick to your plan even if things get painful.

Thanks for reading. This is not financial advice. The author owns none of the aforementioned stocks. He does, however, own Bitcoin. Good luck trading out there and enjoy your weekend.

Check out my new book linked here.