Are you ready for the next crash?

TIP has been my goto website for learning about stock investing and I have recently signed up Stig & Chris's course for ETF investing. I have had not much success in individual stock picks and is now convinced that individual stock pick is not for everyone, myself included for sure.

There has been discussions since 2014 about the coming crash the recent spike really feels reminiscent of 2007-2008. No one knows when it will happen but perhaps like many, I'm sitting on cash waiting for the correction to happen. Knowing that the crash is imminent,
I'm educating myself while trying to identify where to put my money once the crash happens. I think it will be interesting for everyone to share ideas so all of us here can learn. I guess my objective here is so that each of us here can have a clear strategy ready for the next correction.

Here are just some of the questions I have and please feel free to share your ideas outside of these questions.
1) Which sector would you go in at the next crash?
2) Would you be picking individual stock or ETF? Will be great if you can give examples of your picks...
3) Which region (if not just in US) would you invest in that might perhaps most likely see fastest recovery from the crash?

Once again, thanks to Preston and Stig for this wonderful platform you have created!

Ethan

Comments

  • edited August 1
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  • I will avoid holding markets trending below their 200 days simple moving average. If everything is trending down, I will go to cash. Trend following with monthly rebalancing worked both in 2008 and 2000, but not on black Monday in 1987.
  • Hi there Ethan,

    1. As value investors we are looking at individual companies and applying a fundamental analysis to determine both the riskiness of an investment and the likelihood of a return on investment. As such it seems unreasonable to speculate on what might be a favourable sector to examine based upon what might occur in the future, there are a multitude of variables at play here and so it is more prudent to be reactive than proactive, we are not attempting to guess what Mr Market will sell to us at a discount but instead simply waiting for him to make us a suitable offer.

    2. I personally am not a fan of ETF's for numerous reasons. I am averse to paying fees wherever possible, I want to know what I am investing in and cannot know the constituent parts of a given ETF with enough detail to be comfortable, ETF's are path sensitive which makes valuation and perceived rate of return even more problematic. In terms of companies which possess a durable competitive advantage of some sort, we have discussed them in the past here;

    https://forums.theinvestorspodcast.com/discussion/comment/10884/#Comment_10884

    3. It is tricky to determine which economy/market is likely to achieve the fastest recovery post global financial crisis but those best positioned to do so would most certainly be those that have the lowest levels of public and more importantly private debt/GDP.

    Regards,

    Anaximander
  • I won't disillusion myself that i'll be able to spot the next crash. I have done my homework, and keep track of basic economic indicators that might suggest trouble is brewing, but your guess is as good as mine as to their efficacy.

    Someone mentioned trend following ( using moving averages), and I apply that in a general way to how to view stocks or the markets. Mostly what interests me is supply and demand of stocks. basically if big players are getting out en-masse, i'll start to think. But as someone wise said, "Time in the market is more valuable than timing the market". Most of my money is indexed and I have not tried to time the market. Had I thought a crash was coming in 2015 and "sold out" ( moved to something else), I would have missed the 15% gain since that time.

    At the end of the day, I know that corrections will happen. If my principal goes down and I wait it out, it will return in time. Unless you need the money in a few years, I don't see any point in rigorously trying to time entry/exits when the reality is you'll likely miss the notable gains, and suffer the more common drawdowns as they occur.
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