How to get an investing Plan B in case of a crash (Podcast cut)
This is Money Podcast
This is Money
4.1 • 650 Ratings
🗓️ 13 December 2017
⏱️ 6 minutes
🧾️ Download transcript
Summary
It's been a decent year for investors and major stock markets around the world are trading near record highs. Things may continue to go up, but it always pays to have a Plan B just in case they don't and stock markets take a tumble. Simon Lambert, of This is Money, explains how you can build a disaster plan into your portfolio.
Transcript
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| 0:00.0 | going Bitcoin crazy. We continue to see record highs in established stock markets. It is party |
| 0:06.2 | time for investors, but what happens when music stops or they put on a really bad record? |
| 0:12.9 | So do you have a plan B? What's a plan B, Simon? What's all this about? |
| 0:17.4 | Well, it always pays to think about what might happen and not to work on the basis |
| 0:22.5 | that what's happening right now will be what happens forever in a day, particularly when that |
| 0:27.4 | involves you making money by investing. Because as a general rule, what goes up will eventually |
| 0:32.6 | come down at some point. Not necessarily all the way down, but normally down quite a bit. We haven't had a major |
| 0:40.2 | correction in the stock market, by which I mean the stock market falling 10%, so not a crash. In a good |
| 0:49.3 | year and a half, at least, possibly slightly longer. Now, you would expect some kind of pullback of that |
| 0:57.2 | magnitude at least once a year. So that's unusual. If you look at the stock market that leads the |
| 1:03.2 | world, the US is expensive in terms of share prices at the moment. It's not at the max, but the max |
| 1:09.0 | was achieved at the height of the dot-com boom, which was a mania. And in fact, it's only been more expensive at the height of the dot-com boom |
| 1:15.6 | and the 1920s, both of which were bubbles. So you need to be aware that there is the possibility |
| 1:22.1 | that markets are going to take a tumble. And the worst thing that you can do, if markets do take a tumble, |
| 1:29.5 | is panic, sell all your holdings, which is a classic piece of going back to what we were |
| 1:34.6 | talking about. Our brains are wired up completely wrong. There are a million and one |
| 1:40.6 | investing surveys and reports that illustrate that investors manage to underperform |
| 1:46.3 | the companies that they invest in, the stock market indexes that are made up of those companies, |
| 1:52.0 | the funds that they buy because they basically buy high and they sell low. And even people |
| 1:59.7 | with only the vagus grasp of investing will know that actually |
| 2:02.7 | that's the opposite of what you're meant to do. So what you need to do is think about that and think |
| 2:07.2 | ahead. So you could have a plan B that you put into action when the market is falling and it's down |
... |
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