The stock market crashed for a fifth straight day due to the pandemic Corona virus fear. Many investors are saying to buy on the dip but it seems like stocks continue to dip every day creating more losses.
The S&P 500 reported an estimated loss of $1.7 trillion in two days as intense fear continued to cause market meltdown. Many stocks and indices fell below their MA 200 prompting high volume of sell offs.
Stock Market Crashed, What to Do Now?
Buy More Blue-Chip Stocks
Historically speaking, huge drops don’t happen more often, some hit in years. But when they occur, they don’t stay longer. You must invest extra cash and take the opportunity to buy your selected blue-chip stocks to recover some of your losses.
Invest in Gold
Gold has been seen as a safe haven for the longest time. If you think about it, the very history of money has featured coins made from precious metals like gold. In fact, gold was a prominent safe haven in the aftermath of the 9-11 attacks, and then again during Lehman Brothers’ fall in 2008.
Since last week, gold has been trending higher and higher due to investors fearing too much exposure to stocks could drive their portfolios down. Gold now is trading at is highest point since 2013. Another consideration is that interest rates are low, so people have more cash to put into gold.
Trading Gold itself may be too expensive for some investors though, and the entry barriers may be a problem. For this, you may want to consider gold ETFs instead. There are a number of ETFs or exchange traded funds, which track the price of gold and are also affected by gold supply and demand.
SPDR’s Gold, VanEck Vectors’ Gold Miners and Junior Gold Miners can be an option.
Invest in Fixed Income Instruments Like Bonds
Bonds are viewed as a safer haven than gold because they are less risky, particularly US government bonds. As a quick refresher, if you buy US government bonds, you are essentially lending money to the US government, and since investors are confident that the US government can pay them back, they are seen as safe.
That’s essentially why when stock markets are experiencing a downturn, investors flock to bonds to safeguard their money. Bonds compete with investors’ dollars because they are safer, but at the same time, have smaller returns.
In recent times of volatility like the past week, investors have flocked to bonds.
Learn from Warren Buffett
During the Feb 24 market session, as the markets were trending downward, Warren Buffett was a guest on CNBC to discuss his recent letter to investors, as well as give his insights regarding the session.
Warren Buffett said this stock market rout was actually good for his company, Berkshire Hathaway, because it allows them to buy cheaper, saying they “are a net buyer of stocks over time.”
The Sage of Omaha, as he is affectionately called, believes sell-offs like this one are buying opportunities. He noted that these types of -3% downturns have happened countless times in his 89 year life, and they ultimately turned out to be good opportunities.
He noted: “I can’t think of one [-3% sell-off] you shouldn’t have bought on,” he said. “How can it be bad news unless you have to sell?” “We certainly won’t be selling.”
Now, It’s a Great Time to Start Investing
Now that stocks are cheaper, it’s a great time to start investing, too if you are a beginner. Market crashes are like eclipses, they don’t occur every day. Better not miss this chance.
Open your online trading account and use one of the most-trusted trading platforms, eToro.