How to profit from a stock market crash

re: How to profit from a stock market crash

stock market today — Wed, 22 Apr 2009 08:15:39 GMT

That was a well written article, very interesting,thank you for a good read. A market crash presents a great opportunity to determine just what your risk tolerance is. Many mutual fund companies and brokerage houses offer a short survey to help you determine your risk tolerance.

re: How to profit from a stock market crash

Francis Ouseph — Fri, 09 Jan 2009 10:18:27 GMT

One fine day a wise man makes a sudden appearance in a village and announces to it’s inhabitants that he would like buy monkeys for 10 bucks each. Since there are many monkeys around, the villagers go out into the nearby forest and start catching them.

The wise man buys the monkeys in thousands at 10 bucks as promised. Since the monkeys have dwindled by now, the villagers stop catching them. The wise man doubles his offer and the villagers renewed their efforts at catching the remaining monkeys again. Soon the monkeys are so rare that the villagers go back to their farms.

The wise man buys the monkeys in hundreds for the 20 bucks as promised and makes a new offer of 25 bucks per monkey but free monkeys have become almost extinct in these parts by now. Still he manages to buy a dozen or so monkeys at 25.

Now the wise man raises his offer to 50 ! Since he has to travel to the city to attend to an urgent business, the wise man authorizes a deputy to buy the monkeys on his behalf. The villagers try really hard but monkeys are nowhere to be found.

In his absence, the deputy shows the villagers the big cage holding all the monkeys that have been bought till date.

"Dear villagers, here are the monkeys that my boss has collected. I will give them to you at 35 apiece. By the time my boss returns, each monkey would be at least worth 70 bucks a piece; you can sell them back to my boss at a profit and double your money !"

The villagers cough up all their hard earned savings down to the last penny and buy back all the monkeys at 35.

Then the deputy vanishes without a trace; the wise man never heard of again in these parts. The villagers are poorer than ever but the nearby forests are rich with monkeys again !

After many years...

A wise man makes a sudden appearance in a village and makes known his intention to buy monkeys for 10 bucks each. Since there are many monkeys around, the impoverished villagers (with short memories) rush into the nearby forest to catch them...

Welcome to the Stock Market !

re: How to profit from a stock market crash

jim — Wed, 10 Dec 2008 17:59:59 GMT

I suspect that the author works in the industry as he is sing the same tired song. Buy and hold. This is the advice of the past. It is advice that the financial industry wants you to follow. It gives banks, firms and funds your money for long term. It served me well over 25 years and has cost me big time in the recent 1 year. It is folly to ride the market to ruin. Funds are set up to make it difficult to move in and out. I moved all my IRA money out of index funds into money market when Fanny and Freddy were looking to go under. Glad I did. When the market starts to stabilize I will buy companies not funds and I will use stop loss. My 401k does not allow for buying individual stocks so my 401k money remains in funds. I continue to contribute the max hoping that I am buying cheep. One more thing, I pay interest to nobody for anything.

re: How to profit from a stock market crash

Ro — Fri, 31 Oct 2008 02:07:25 GMT

This was a great article. I started buying into mutual funds in the early 90s and took some profits in 1995. I have seen the wild swings before. I was saddened to see my losses but peoples should remember the time to buy is when the market's down. I keep putting money in my 401k and try not to look at the low balances.

Even if you retire tomorrow, you won't take all of your money out tomorrow! People seem to forget this little fact.

re: How to profit from a stock market crash

Larry L — Thu, 30 Oct 2008 18:24:27 GMT

First, this article ignores the fact that different people have different needs. One of my colleagues noted that he has lost a decade in the market and he is older than I am with kids to send to college. He does not have the time to deal with a drop in the market of this size. Markets were never perfect (and never will be) and there are people out there who think that there is nothing better than "the market". That is just simplistic nonsense. There is an entire universe outside of the markets: your job, your family, your community, our government.

Second, "getting it right" does not require perfection. You don't have to get out at the absolute top or get back in at the absolute bottom. And, the decision does not have to be all or nothing. You just have to have some sense to trim positions when things seem over the top and to start buying when things are scariest. Solutions that seem to be too good to be true (like the writer's friend) probably is. This solution only requires that you pay attention and have some discipline.

re: How to profit from a stock market crash

WisdomFolly — Thu, 30 Oct 2008 07:14:27 GMT

You don't need to be able to "time" the market; just to be able to identify the trend. When the market trades below the 200-day moving average you should begin to get out. By the time the 50-day moving average crosses below the 200-day moving average you should be completely out. When the market starts trading above the 200-day moving average you should start getting back in and by the time the 50-day moving average crosses above the 200-day moving average you should be fully invested. Avoiding huge losses is much more important than you realize. A 10% loss requires a 12.5% gain to get even, but a 50% loss requires a 100% gain. You don't need to make two right decisions -- just one: follow the plan. Buying fear is just poor advice. What happens when fear turns into panic? Fear is the wrong thing to key off of. Do you know what a better one is? SKEPTICISM. Buy when few think the market can go up yet somehow it does. Buying this week is much better than buying two weeks ago even though the market is about at the same level.

re: How to profit from a stock market crash

Art Chase — Thu, 30 Oct 2008 00:55:13 GMT

To invest properly, it helps to be able to read a chart. Stocks have been in decline for a year. I doubt that anyone who rode it down is happy now. My plan has always been to buy in an uptrend and sell in a downtrend. Works for me. I don't think it is good advice to tell people to hold when they may not have enough time to recover.

re: How to profit from a stock market crash

barrington — Wed, 29 Oct 2008 14:51:37 GMT

awesome article!!! thanks for offering some clarity.