As Mark Hulbert of MarketWatch points out, there is a frighteningly similar correlation going on between the market action of 2012-present and that of the market moves during 1928-29. That’s right, 1928 and 1929, the period leading up to the stock market crash preceding The Great Depression.
After viewing the chart comparison in his recent article on the subject, while I’m not thoroughly convinced this is the route our current stock market will take, I’m preparing myself just in case.
Long-term equities forecasting
I used to let the stock market’s daily fluctuations really get to me. However, I eventually realized that letting the up-and-down movements of an investment that I wasn’t going to need until retirement (another 30 or so years away) get to me was rather silly.
I therefore adopted a longer-term approach to my retirement plan investing. I moved much of my plan into a more stable income fund that not only moved with the market (but in a calmer manner) but pays out monthly dividends that are reinvested into the plan. These reinvested amounts continue to build share value while dollar-cost-averaging the price of share purchases over time. This means that even if the stock market plummets, I’ll still be building my share total with shares purchased at even lower prices.
I’ve been a long-time fan of diversification; and by diversification I mean more than just spreading money out in the stock market. I’m talking about various investment types, asset classes, and forms.
In an effort to better prepare ourselves for a precipitous market drop, we’ve made several moves to spread out our money. First off, since we need somewhere to live anyway, we’ve put more money into our home, paying it off in full so that we’re mortgage free. We’ve also taken the opportunity to purchase physical silver coins, since silver has recently been hovering around multi-year lows. And we also increased our cash emergency fund by $2,500, taking it from $5,000 to $7,500.
Since we paid off our student loans in our 20s, we’ve placed a focus on debt reduction and remaining debt free. We’ve cut our credit cards down to one, and as I mentioned, we paid off our home, putting extra money toward our mortgage through self-payments and a bi-weekly mortgage plan, building equity until we could downsize and purchase outright.
Lately however, we’ve taken our debt-reduction process a step further in an effort to be better prepared just in case the stock market collapses. With our reserve account funded and other debt paid off, we’ve been paying certain bills well in advance of when they’re due. With expenses like income taxes, property taxes, and insurance, we often get our bills months in advance to when they are actually due. However, we haven’t been waiting to pay them. Instead, we’re paying them as soon as we get them so we don’t have them lingering in the event we encounter a financial pitfall.
More From This Contributor:
Building a Revenue Producing Blog
I Won’t Be Waiting to Take Social Security
Preparing to Publish My First E-book
The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.