History shows that every so often, the stock market will crash. The good news is that I’m not expecting one to occur any time soon and continue investing as normal. But that doesn’t mean that one won’t happen.
In light of this, I think investors should always have a plan of action in case a crash occurs out of the blue, as they invariably do.
Preparing for a stock market crash
When the stock market takes a sudden nosedive, it’s easy to succumb to panic and make rash decisions. However, experienced investors understand that turbulent times can present extraordinary opportunities.
The key is to be prepared and to keep a watchful eye on the ASX shares that have been sold off, potentially becoming hidden gems for bargain hunters.
During stock market crashes, quality companies with strong fundamentals often get caught in the crossfire. This can lead to unjustified price drops. Savvy investors that have done their research can capitalise on these situations by picking up these ASX shares at discounted prices.
For example, look at Goodman Group (ASX: GMG). During the COVID crash, you could’ve picked up its shares for around $11. Its shares have almost doubled in value since then. And it is not an isolated case, there are countless other quality ASX shares that were hit hard and have now gone on to increase the wealth of prepared investors.
While we may not have a crystal ball to predict the exact timing of the next stock market crash, we can certainly prepare ourselves for its eventuality.
By staying informed, maintaining a level head, and identifying the ASX shares you would buy if they became undervalued, you can position yourself to thrive when the market inevitably takes a tumble.
It is also important to note that this shouldn’t stop you from making regular investments in ASX shares. After all, you could miss out on a 50% stock market gain while you wait for a 20% crash.