Wall Street crash, bang wallop! Basic preventative advice for a newbie

Hi freetraders!
Ok, so as newbie (very newbie) to investing I’ve been reading as much as I can, and watching as many educational videos as possible. The surface has yet to be scratched, even though I’m trying to submerse myself in the art of trading.

I understand that a crash is inevitable so it got me thinking how I could protect myself from it, and also how a newbie could possibly benefit from it. Instead of trying to add even more “homework” to my surface scratching I thought I’d turn to our community for a few pointers to give myself, and others, a head start.

So let’s say I have £5k to invest. I currently have £3K already invested whilst learning. Trying to make small wins and learn with real money, as it keeps me more focused.
Firstly, what are the main signs to look out for to know when the inevitable is on the horizon, and hopefully be able to react accordingly in time?

Secondly, what should I do with the stocks that I’m already invested in?

And finally, would I be correct in thinking that when the market drop happens, it would be a good time to invest with any spare cash as there could be “bargains” to have?
Apologies if any of these question sound obvious or stupid!
Many thanks in advance for any responses.

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Best way to invest for newbie is slowly overtime long term investing. Saving each month and buying. If you buy and sell once they rise you’ll be left with a portfolio of loss stocks that didnt. You dont want a portfolio of losers .

A great way is look at an index. Look at the peaks and look how long it took to the next peak at same level. Sometimes its months.

Try not to have more than 5% in any one stock is the best tip I can give.

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This. I also get the impression that trying to predict or game a correction (or anything in the markets) is fairly futile since as retail investors we will always be the last ones to the party.

Ultimately, it’s always good to just buy the world through large scope ETFs.

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No-one can predict when a correction/crash will happen and while there are a bunch of potential signs that the market’s due to go down, some of those signs have probably been there for the last half a decade. So yes, a crash is inevitable, but no-one knows why it’ll happen, when, how much or for how long before a recovery starts. This makes timing the market very hard.

I guess the way a newbie (but imho any investor) benefits from it is by

  • being patient and in it for the long term (which might mean: not buying and selling frequently, but instead steadily buying)
  • getting more diversified (which might mean: global index tracker etf, eg VWRL on Freetrade, and considering a global bond etf to suit your risk appetite)
  • focussing on the things that you have some control over (which might mean: your investing behaviour, thinking long term) rather than the things you don’t, like what the market is going to do in the next hour, day or month

So buying the same amount monthly of a low cost global index tracker and a low cost global bond tracker (those in a ratio to suit your need for growth, attitude to risk and investment horizon) and rebalancing occasionally is a common strategy. And actually pretty hard to beat in the long term net of costs. And funnily enough that works when the market’s going up too :slight_smile: … and I now see that Ben and Simon have written the same but more neatly.

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Look for signs of a Speculative Bubble.

If prices keep going up inexplicably at some point the steam will run out and a crash will happen.

The last few years has seemed to have had a bit of excess optimism with good news persisting and bad news quickly forgotten. We had a small correction last year which seems to have cooled enthusiasm so looks to be giving us a bit longer.

While a I agree with all the pound cost averaging and tracker suggestions (I do these), it’s not really self investing.

Things I do to defend against crash:

REIT with decent revenue % vs its assets. REITs have to pay 90% of revenue as income so can’t just keep it. The assets are mostly buildings but unlike funds where scared Investor force the sale of the best assets the scared Investors can just take a hit on the share price. Of course property crashes too so it’s not bullet proof.

I have a Gold mining company and a Gold ETF, these are painful to watch as they go down when things are going well.

I don’t do the government bond thing myself but holding an ETF of these can help in a crash. Just be aware at some point interest rates will go up and the capital value of bonds will go down.

What I don’t do is fill my portfolio with defence assets maybe only 10%-20%. I am not trying to make money in crash I am trying to limit my losses. If things go to plan. My defence assets will do will well in a crash and I will sell them and buy more depressed equity.