How can I deal with a stock market crash? Here’s one strategy I’m considering

I hope it doesn’t happen, but a stock market crash is a possibility.

Prices are increasing across the world and the US Federal Reserve is now talking about tapering monthly asset purchases. Other central banks, including the Bank of England, are already considering raising interest rates. Higher rates have historically had a negative impact on the stock market. At the moment, as share valuations are relatively high, an interest rate hike could easily be a catalyst for a crash.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

My strategy – a gold ETC

Thinking about my own portfolio, I want to try and reduce my downside risk. Though there are many different options, I really like the idea of gold as a hedge against a sudden market downturn.

The price of gold is largely thought of as being negatively correlated with stock prices. Usually, when the market collapses investors flock to the asset as a safe haven. During the Covid pandemic in 2020, this is what happened. I realise that in investing there are no guarantees, but if another crash happens, it is likely to be the same again.

Having decided to invest in gold, there are a few choices available to me. One option is that I could physically buy some via a broker or the Royal Mint. However, storage needs to be thought about and can be costly.

In my opinion, one of the easiest ways is through a gold ETC (exchange-traded commodity). This is a fund that tracks the spot price of gold, but trades like a share and is available to buy and sell through most online brokers.

There are lots of ETCs available offered by many investment management companies. Personally, I like iShares Physical Gold ETC (LSE:SGLN). This has been going since 2011, is large in size (over £9bn), and has a low ongoing charge of 0.15%.

Other considerations

No strategy is perfect and this is no exception. Firstly, in a high interest rate environment, an asset without any earnings such as gold may not be as good as investments with yields, such as high dividend shares. Secondly, in times of a rising stock market, gold at worst can suffer large declines in price and at best endure periods of large volatility. Over the last 18 months, as markets have rallied, this fund at its lowest point had declined over 20% from its peak. It’s not an asset choice for everybody.

For myself, I believe the key to building any resilient investment portfolio is diversification. Even today many professional investors still consider gold as a sensible portfolio component.

I think of iShares Physical Gold ETC as a kind of insurance policy against a stock market crash and am comfortable allocating a little portion of my holdings to it.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.


Niki Jerath owns shares in iShares Physical Gold ETC. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This post was originally published on Motley Fool

Financial News

Daily News on Investing, Personal Finance, Markets, and more!