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Sunday, June 23, 2013

Can You Survive a stock Market Crash ?

We're talking very simple, common sense rules to remember in a market crash like: •I am a long-term investor and I know the stock market always comes back. I will sleep secure knowing history is on my side. •I will remember to sell high and buy low. If the market crashes, I will move money from cash equivalents (Treasuries, etc.) into stocks with every 50-point drop in the Dow or five-point drop in the S&P 500. (Do the reverse when the market hits new record highs.) [And remember, those were 1995 benchmarks. Adjust accordingly for 2013.] •I will make sure anything I buy was hit by the decline. In other words, I won't buy anything that didn't go down, because it probably won't go up. I want to use a big market break to buy quality stocks cheaply. •I will not read, listen to or believe negative stories during the crash. I know things are never as good as they seem when you're winning, and never as bad as they seem when you're losing. The blessed media will probably be uniformly negative if we have a real barn burner of a crash. The obvious question: Given the nature of the markets, with high-frequency trading, the emergence of ETFs and an overall different market characteristic than 18 years ago, do the same rules apply today?
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