Are we unavoidably heading towards a precipitous stock market crash in 2019? According to certain sources, it appears as if the so-called “perfect storm” may soon be on the horizon. Some of the associated factors include the potential for a looming trade war between the west and China, the decidedly spurious “America First” policy embraced by the Trump administration, Brexit-related uncertainty, and the current economic weakness associated with the technology sector. While predicting a crash or even a severe recession is not an exact science, there are still methods which can be employed by astute investors if they hope to remain relatively immune from such volatility. Let us take a closer look.
Greed Versus Fear
We will first address the psychological side of investing during uncertain times. Expert traders such as Warren Buffett will invariably state that poor market conditions are the very same times when fortunes can be made due to countless underpriced assets. The key is quite simple: buy low and sell high. Those who are able to reign in their fear and tap into their profit-making abilities could very well capitalize upon any such downturn. So, what are some effective strategies to employ?
Choosing the Correct Blue-Chip Companies
Many investors tend to flock towards blue-chip holdings during inclement times due to their apparent stability. However, money can still be lost if the incorrect choices are made. It is wise to examine several metrics of the firm in question before making any type of firm commitment. Some questions to ask include:
- Does it offer an amenable return on equity?
- Is the debt-to-equity ratio relatively low?
- What are its gross profit margins?
- What is the real-time franchise value of the business?
Should all of these areas prove to be stable and lucrative, an investment could very well be a wise choice.
All That Glitters…
It is a well-known fact that precious metals tend to perform quite well during a massive bearish climate as a result of their safe-haven status. Having said this, be wary of those metals associated with technological production such as palladium and rhodium. If production capacities fall, their value could be dramatically affected. It is best to stick with well-known performers such as silver and gold.
Understanding how spread betting works is another way to take advantage of the next market crash. Spread betting is unique in the fact that money can be made during rising or falling markets. The trader will simply have to correctly predict the direction of movement. Furthermore, many positions represent short-term trades and you are exempt from capital gains tax; an added benefit when budgets may need to be tightened. Numerous products are offered, so the chances are high that you will be able to encounter the most appropriate asset. Spread bets should always represent a portion of your portfolio. It is yet to be seen whether 2019 will usher in a massive market re-correction and still, it pays to remain one step ahead of the curve.