The Chinese stock market took another big hit on Monday and media there have already dubbed the day’s activity “Black Monday”.
The Shanghai Composite index dropped 8% on Monday. Since June 12, the Shanghai has seen 32% of its value wiped away.
As the effects of the Asian market correction ripple west, the Dow Industrial Average could be in for another rough day after dropping 530 points on Friday — the 9th worst drop in US stock market history.
The 400 richest people in the world experienced a painful market last week as they lost $182 billion in wealth, which amounts to a little over six percent of their collective value.
The dollar has lost value over the past two weeks and fell to $1.12 against the Euro at one point last week.
Commodity values dropped a 13-year low as well with the price of cooper — a sign post for construction — at a six-year low. Oil received its biggest beating since 1986.
There’s good reason to be concerned about the current stock market situation. Some pundits say this is merely a short-term correction, others think it’s an earthquake-sized collapse. Many experts point to the meddling of centralized banks and governments for tampering with the markets with quantitative easing practices, printing more money and keeping interest rates low.
With the 2008 crash still fresh in everyone’s minds it will be interested to see if investors learn from past mistakes.
Here are five tips to surviving a market crash:
1. Don’t Panic and Sell: Riding it out may be the best remedy of all because selling locks in losses. By April of 2009, much of the bleeding had stopped and shrewd investors began rummaging through undervalued stocks.
2. Allow Mutual Funds To Do Their Jobs: You pay fees — large or small — to your mutual fund portfolio managers to do just that — manage the portfolio. Good fund managers will make adjustments to their funds with hedges, sales and purchases to help insulate the portfolio. Trust them to do their jobs.
3. Individual Stocks Can Fluctuate: If your portfolio contains a lot of individual stocks, prepare for choppiness. Large individual stock holdings can cause whiplash effects in your portfolio. A blend of stocks, mutual funds, bond funds and other instruments will help stabilize a portfolio.
4. Gold A Shiny Bet: As markets drop and currencies take a hit, gold often bounces. The Spider Gold Trust currently sits at favorably low pricing. Famed investor/hedge fund operator Stanley Druckenmiller sunk $300 million into the trust because he sees it as a solid investment. “Before the (currency) move from the Chinese government, you couldn’t find anyone who could make a bullish case (for gold),” Dan Denbow, a portfolio manager at the $700 million USAA Precious Metals & Minerals Fund told Bloomberg.
5. Keep Your Cash On The Sideline: If you have cash sitting on the sideline, keep it there. If the market does experience a full-on crash or even a major correct, bargains will abound. Smart investors picked up the pieces of the 2008 crash and profited handsomely by identifying under-valued stocks.