A few weeks ago, I bought shares of Exxon Mobil and they’re down over 30%. Most of the other stocks in my portfolio are down as well. Although, I’m not worried. On the contrary, I’m excited to find even better buying opportunities.
I’ve saved for a rainy day – more like a rainy few years – and have about 50% of my wealth in cash. I recently let some short-term treasuries mature. So, if the market continues to drop, I’ll put close to 100% of my total wealth – minus my emergency fund – in stocks.
How to Handle a Stock Market Crash
I might make handling a stock market crash sound easy… but it’s anything but that for most people. And I admit, it’s still a bit of a challenge for me. It’s not fun watching my portfolio of stocks tank. It’s hard-earned money disappearing, on paper.
So, last week I took a break from the constant headlines. Most of them lead to overreactions and herd investing. Instead, I took a vacation from news, work and even living in Baltimore. I visited my parents out in the Black Hills, not far from Mount Rushmore. While the markets were tanking, I was skiing with my dad (who’s still a pro on the slopes)…
It was great catching up with my parents and this helped me reset. While traveling I also took a break from writing and picked up my favorite book, Enders Game. It’s been awhile since I’ve read it and I made it through all 400+ pages. I’m a slow reader so that’s a lot of down time. It’s a great story and I might do a book review soon. There are some great lessons hidden within.
Taking a break and stepping back from the headlines helps put things in perspective. As the saying goes… it’s better to follow the trend lines, not the headlines. Since I’m a long-term investor, I can easily wait out short-term panics and bear markets. In three, five and 10 years, the stock market will be reaching higher highs.
How to Take Advantage of the Stock Market Crash
No one knows how much the market will continue to drop. So, to take advantage of the stock market crash, I’m dollar cost averaging in. I invested close to 10% of my total savings in Exxon earlier this month. Now this week I’ll likely put another 10-20% into the stock market.
If stocks stay in bear market territory, I’ll put almost all of my savings into great companies that trade at deep discounts. These businesses can easily recover from the 2020 market crash. And many of them will emerge stronger following the recession. Here are a few of the companies on the top of my watch list right now…
- Exxon Mobil (XOM) – Might Double Down
- Wells Fargo (WFC)
- Walgreens Boots Alliance (WBA)
- Archer Daniels Midland (ADM)
- 3M (MMM)
- Emerson Electric (EMR)
There are many other stocks that I’m tracking. And if I end up buying into any of these businesses, I’ll let you know. Overall, I’m excited to find even better buying opportunities going forward.
Trying to time a market bottom is near impossible. Instead, easing into stocks over time has led to higher long-term returns. Once I’m close to 100% in stocks, I’ll reinvest dividends and other saved income in a more systematic approach. Every quarter or six months, I’ll let cash pile up and will then put it into whatever I find to be the best value opportunities at those times.
Handling a stock market crash isn’t easy and I hope sharing how I’m surviving a bear market helps. It’s good to step back from a panic-stricken market. Instead, use history as a guide. Try voiding the news fodder of the day. And play the long game.