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Money Smart: Survive a stock market crash

Are we headed for a stock market crash? Over the last several months, analysts say warning signs are flashing yes. Here are tips to survive the next one.

SAN ANTONIO — Are we headed for a stock market crash? Over the last several months, analysts say warning signs are flashing yes. Here are tips to survive the next one.

The most recent stock market crash happened in March 2020. As the coronavirus spread across the U.S. last year, millions of Americans lost their jobs and businesses were forced to close its doors. Within months, the market not only recovered back to its pre-crash level but climbed higher. 

The coronavirus crash stands as a reminder that the market and the economy are not the same. Also, it serves as a lesson that the market is unpredictable. As analysts warn that another stock market crash is inevitable, KENS 5 spoke with a local financial advisor about the warning signs.

“One of the first signs that people look for when they’re worried about the stock market having some vulnerabilities is, is there a lot of excesses or froth or people taking extra risk? We certainly have that in 2021 whether it’s people borrowing money to buy stocks, whether it’s people investing in things that don’t have any real merit,” explained Karl Eggerss, senior wealth advisor and partner of Covenant.

He said another area to look at is the bond market where debt securities are bought and sold. Eggerss said a big warning sign is if companies are defaulting on their loans because that means they’re experiencing credit problems. He says as a result, it typically spills over into the stock market. If a stock market crash happens again soon, here are ways to reduce the anxiety and get prepared with your investments now.

Don’t try to predict 

“It’s always better to have an allocation that you can sleep with that still accomplishes your goals, but you’re comfortable with. As opposed to saying I’m going to time it perfectly,” said Eggerss. “Many people I know that did sell before 2008 financial crisis or even before the pandemic of 2020, they had trouble getting back in. They avoided the downside, but they also sat on the sidelines waiting to get back in because you think it’s going to continue to fall. You don’t know exactly where the bottom is.”

Accept market volatility 

“We should expect a fall in the stock market. When you invest, that’s part of getting the gains. It's putting up with some of the bumpiness and volatility,” said Eggerss. “Anytime you can invest and diversify, things that move differently, and have a different path, it always helps. So, stocks may not be correlated all the time to bonds, bonds may not be correlated to real estate or cryptocurrencies.”

Don’t panic, do plan

“The best plan is to figure out what you’re trying to accomplish, when you’re going to need that money, how much it’s going to take whether it’s to fund your retirement, to fund buying a new home,” explained Eggerss. “The longer you don’t need to touch that money, the more aggressive it can be. Usually, stocks, real estate have been historically, one of the best things to invest in for long term. If it’s shorter term, it’s bond’s, CD’s, things like that. So, it’s really layering your portfolio based on when you need that money.”