How to Survive a Market Crash (and Get Rich)

Listen up. When the stock market is crashing, it's times like this when massive amounts of wealth gets transferred from the people who are scared and act emotionally to the people who are prepared and know what's up. I want you to be in the second group. So in this video, we're going to talk about how you can best prepare and make sure that this next crash and possible recession is going to be the best thing that happened to you instead of the worst thing that ever happened to you. Quick recap. On the 2nd of April, Trump declared Liberation Day, imposing a baseline 10% tariff on all imported goods and reciprocal tariffs on 60 different countries. Following this announcement, the S&P 500 experienced a sharp drop of over 10% over the course of two days, its worst performance since the COVID pandemic. International stock markets were hit just as badly as well. So why is everyone so freaked out about these tariffs? First of all, the tariffs are projected to raise the average U.S. household's annual expenses by around $3,800 a year. This is according to the budget lab at Yale University. Not only this, but we are expecting to see some ripple effects as other countries retaliate with their own tariffs. And this is all happening against the backdrop of inflation that was already a concern and a lot of geopolitical tensions that were existing even before this whole tariff fiasco happened. Now, we might need to buckle up, but that doesn't mean we need to panic because when you understand how things work, when you have knowledge, then you don't have as much cause to panic. So let's break down market crashes. There are three types of crashes. The first kind is called a correction. A correction is when the market falls at least 10% from its peak. And interestingly enough, a correction happens about every year. Market corrections tend to last around four months until they fully recover. And since 1980, there have been a total of 26 market corrections in the U.S. stock market. The second type of crash is called a bear market. This is when the market falls 20% or more from its peak. A bear market happens around every 3.6 years and they tend to last around nine and a half months. And now for the third type of market crash, which is what we're all fearing, is a collapse. This is when the market falls 30% or more from its high. A market collapse happens a lot less frequently around every 8 to 13 years. As of the moment I'm recording this video, we were kind of almost already in bear market territory. We were just at the cusp. We're not in collapse territory yet, but who knows, we might get there. Maybe by the time I'm uploading this video, we're already there. Or maybe it turns out this was just a little scare and we get right back into correction territory and then the market just resumes its upward trend and we just carry on and forget all this happened. Either way, it's good to be prepared. So that's why I created my market crash survival guide. This is for all of you out there who need guidance right now. For those of you who want to know how to best prepare yourself to benefit from this crash, whether you're already investing or you're interested in getting in. So grab my market crash survival guide here. It's completely free. I think you're really going to find it useful in times like these. So now you understand the three types of market crashes. And the takeaway that I want you to get from this is that market drops, whether they are corrections, bear markets, or full-on collapses, they actually happen more regularly than you would expect. So in a way, we can actually take some comfort from this because markets do follow cycles. So we're just following the cycle. So in a way, it's actually almost not even a surprise if you really look at the data. That being said, I'm not saying that it's not okay to get emotional or a little bit nervous. I think we're all feeling the same things because we're all human here, but there are things that I don't want you to do. And there are also some things that I want you to do over these next few weeks and months. So the first thing I want you to not do, whatever you do, don't panic sell. If you decide to sell, it's normal to sell your investments once in a while for various reasons, but panicking is never a reason to sell. The only truly valid reason to sell is because you anticipate needing the money to use in cash relatively soon. So we're talking in the next one to three years, you need the money, then you might want to sell at least the portion that you're going to spend over those few years. Another valid reason to sell is if you are rebalancing your portfolio. This is an advanced investing technique where you are just adjusting your asset allocation in your portfolio to benefit from market movements. Other than that, there isn't ever really a valid reason to sell. So that's why I want you to really think through this. Now, personally, I have lost hundreds of thousands of dollars over these last few days. And I put lost in air quotes because the thing that I want you to understand is until you sell, you actually haven't lost money because there's a huge difference between paper gains, paper losses and realized gains and realized losses. So whatever your account balance is saying it is now, that doesn't mean that's what it is. You haven't locked that in yet because that could change tomorrow. It changes minute by minute. And that applies to whether your portfolio is up or down. So that's why I said don't panic sell, because even though your portfolio looks like it's in the red, the game is far from over. Picture this scenario. You wake up, you see the headline news, you panic, you get scared and you sell off everything. And then what if over the next five months the market recovers fully back to its all time highs? Because that's actually exactly what happened to the S&P 500 back in March 2020 when the market was crashing because of the pandemic. So imagine if you were one of those investors that got scared and you panic sold and you locked in your losses way at the bottom of the market. And over the next five months, you could have not only made all of your money back, but then doubled your money from there. But what's even crazier is this can even happen from one day to the next, just like it did on March 12th of 2020, when the market was down nine and a half percent. And then literally the next day on March 13th, the market was up nine point three percent. So literally in the span of two days, you were whiplashed from down almost 10 percent to up 10 percent the next day. So with all this tariff news and updates coming out, things can change minute by minute. So you don't want to get whiplashed by panic selling and then having the market recover everything the next day. Another really interesting fact to keep in mind is that according to a JP Morgan study, 60 percent of the best trading days out of the year usually tend to happen within two weeks after the worst days in the market, which means when it's the hardest, that's actually when you better stick around the most, because those few weeks following the worst days are your best chance to make back whatever paper losses your portfolio is showing. So if you're going to sell, make sure you do it rationally. I'm not going to stop you from selling. Just don't do it in a state of panic. And remember that decisions you make in times like this over these next few weeks and months will have consequences to never do anything from a place of fear, do it from a place of calm rationality and having looked at the data. OK, so now that we've talked about what not to do, let's talk about what to do, because guaranteed there will be a lot of people who are going to get rich by doing these right moves. And a lot of rich people are already doing it. So they're going to get even richer. So what exactly are they doing? What these people know is that right now, the stock market is on sale. Prices are really, really low. So if you think about it at a department store or a grocery store, when things are on sale for 20 percent off, you usually tend to load up. And if things are on sale for 50 percent off, forget it. You are going to load up the truck, right? Because you don't want to miss out on a deal. And the stock market is the one place in the entire world where people do the exact opposite. When things are on sale, they actually sell and run in the other direction instead of running in the direction to load up. So even though it's really, really hard to do emotionally, if you have the cash, if you haven't invested before but have been waiting for your moment, this is going to be a great moment. So if you can, it's a great time to buy more investments. Now, in terms of when exactly when is the best timing? First, you've got to know that it's impossible to pick the market bottom. We don't know how far this is going to go. Maybe it's not even going to be that bad. So I have a rule of thumb, which is when there's a market crash or correction of any kind, I always set aside a little bit of cash in a savings account to buy more investments exactly during times like this. And in order to save myself from the analysis paralysis of trying to figure out when the market bottom happens and when is the best time to buy, I just have investing rules that make my life really simple. The first is when the market drops at least 20% from its all-time high, I will use half of that savings to buy investment. And then the other half, I'll just leave it there. And if the market drops 30% from its all-time high, that's when I'll use the remaining half to buy more investments. So I buy half at 20% and I buy another half at 30%. Yes, I could maybe wait until the market drops 50%, but statistically, a 50% market drop is so rare that I'd rather not wait around trying to pick the market bottom. I buy at 20% and again at 30%. Now, it would be great if I had a crystal ball and knew exactly when the market bottom was, but after almost 15 years of investing experience by now, I have realized that there is no such thing as making perfect decisions or perfectly picking the market top or the bottom. The best you can do with investing is making reasonable decisions, not perfect decisions. And just by doing that, you'll be ahead of the majority of people who either don't ever invest at all or only invest emotionally. Now, if you're curious about what to buy, definitely check out my how to invest for beginners video right here. It's a really good walkthrough if you're completely new to this whole investing game. So that's my investing rule, but I want you to create your investing rules, especially during a crash. So that's exactly what my market crash survival guide will walk you through. I'll walk you through how to create your own investing rules so that you can make smart, rational decisions that you've thought through in advance instead of reacting emotionally. So again, grab my market crash survival guide below. I think you're going to love it. Okay. The next thing I want you to do is if you don't have one already, I want you to get together an emergency fund as fast as you can. Ideally, you have at least six months worth of bare minimum living expenses in a high yield savings account. I have a list of my favorite high yield savings accounts below these days. They're paying around 4%. So it's a great place to park short term cash for you to use. If God forbid you get laid off from your job or things that tend to happen during a recession. Now, this step is actually more important than buying investments right now, because if you don't have an emergency fund and you put all your money in the stock market, sure, that's a smart move in the sense that you're buying stocks on sale. But if you get laid off from your job and you lose your source of income, and because you don't have this emergency fund cash cushion, you'll be forced to tap into your investments to cover you for that, which means you might have to sell those investments at a loss. And you never want to be forced to sell your investments at a loss because you have to pay your rent next month, which is why an emergency fund is so, so important. If you don't have one already, now's a good time to start canceling some subscriptions, hustling up some extra cash to get that cash cushion. That's already going to make you feel so much more secure and ready to handle whatever is in store for us in these next coming months. So that is my two cents on how to navigate these times right now, how to position yourself to get rich instead of getting screwed. And I really hope you found it helpful because I think we could all use some reassurance right now. So even though I don't know exactly what's in store for us over these next few months, what I do know is that we will get through it. We always do. We navigated a freaking global pandemic. We've navigated terrorist attacks. There's been world wars. We've always gotten through it. And the economy has only ever gotten stronger on the other side. Remember, in times like this, it's very easy to focus on the pessimistic, especially because that's what the news headlines are all talking about right now. But let's also not forget there's a lot of good things happening for us right now. There's a lot of innovation with AI. There's a lot of technological advances that are going to help the economy. The world is changing thanks to things like blockchain and cryptocurrency. So there's a lot of good things working in our favor right now. So let's not forget that. I know money can be very, very emotional in times like this when the market is crashing. There's something in our lizard brain that really gets activated. So I just want us all to take a deep breath and remember that as long as we have air in our lungs, we have people that love us. We have access to food and sunshine and clean water. We are actually doing okay. We're gonna be okay. We're surviving. So that's it for this video. I really hope it helped. Whatever's happening in the next few months, I've got you. I'll be here to reassure you and tell you what you need to hear and we will navigate through this together. Thank you so much for watching and I'll see you in the next video. Bye!