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What if the Stock Market Crashes?

US stocks are flying high lately, with the S&P 500 and the Dow Jones Industrial Average hitting record highs. I just checked my portfolio and was shocked to discover that I’d just made $7000 US in the past 30 days. Now, I’m under no illusion that these are “actual” gains because what goes up, must come down. Here’s what I do to prepare for the inevitable.

I like to have at least 5 or 6 limit orders going at all times, with prices set for 10-20% below the actual market price of the stock, for a total of around $15 000 US (which I will borrow from my broker on the margin at extremely low interest rates). I choose stocks that I already have in my portfolio, but which I don’t have full shares of and that I want to add to.

Then, when something terrible happens in the USA (a natural disaster, terrorist attack, huge announcement from the fed, a bubble bursting) and the stock market goes into serious decline, I’ll be automatically buying more stocks at a significant discount.

And…check out out this book from one of my favorite investing gurus. He also has a radio show that I enjoy: Investtalk.

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