Stock Market Crash - Are You Prepared?

Anyone who bought stocks in mid-1929 and held onto them saw most of his adult life pass by before getting back to even. " -Richard M. Salsman*

No one wants to think about a stock market crash of 1929 happening again today. A rare article or report will appear and the news media will pass on the story believing a crash is as likely as Richard Branson building his hotel on the moon. The reality is that stock markets do crash, in 1929, in 1987 and sometime in 20??

One thing that is certain about a crash is that people are never prepared for it. We've been lulled into a belief system that stocks go up, and stocks go down and over time you simply buy and hold and earn a return that allows your money to grow on average at 8 percent. I recently spoke with a stock expert who said most of his clients are in their 60s and invested in conservative investment portfolios. When I asked further he admitted that many hold 50 to 60 percent of their monies in equities, hardly conservative when a major correction occurs.

There are some things you can do to prepare. First, take a look collectively at your entire financial picture. If suddenly your 401K and stock investments were slashed by 40 percent, could you still remain in your home, keep your car, pay for health insurance? If not, you might consider moving a portion of your current assets held in equities to more stable accounts such a jumbo cds in FDIC insured institutions. There are also money market accounts that can return 4 or even 5 percent with large account balances.