How to Profit from the Crash!

Profit from the Crash!

“It came with a speed and ferocity that left men dazed. The bottom,
simply fell out of the market… The streets were crammed with a
mixed crowd — agonized little speculators… sold-out traders…
inquisitive individuals and tourists seeking … a closer view of the
national catastrophe… Where was it going to end?”

Many analysts are now coming out to warn people about the dangers of the stock market in view of the recent drop in stock market of more
than 20%.

“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets”. - Peter Lynch

This is a global bull run driven by liquidity… …however, when things turn around, it will be BIG, BIG Crash becos much of the liquidity is attributed to Leverage by Hedge Funds,FII’s, Private Equity,F&O … when liquidity tide turns and risk premium increases… ..the crash would be like an avalanche… .

What will be the trigger for the Crash? It can be anything.

“The borrowing has to stop. The market slide was a shot right between
the eyes that had better wake us all up to simple fact that we can’t keep romping forever on borrowed money.”

The thing with Global Liquidity as I mentioned, it can vanish overnight as well, when everyone rush for the exit, it is when the crash would occur. What cause everyone to rush for the exit door….I really don’t know.

Why will each crash become the WORST in history is becos of the HUGE expansion in Deriviatives and LEVERAGE in the past 5 years..Every year ateast 40-50 stocks are added in the F&O Segment ….and the Massive Growth in things such are very dangerous.

More importantly, we must ask ourselves how are we prepared for this
Crash, how are we positioning ourselves to not only survive the Crash
but be one of the Few that will actually increase our wealth massively
in the coming Crash.

Each Crash is a MAJOR Transfer and Re-allocation of Wealth. The IMPORTANT question is whether you will receive wealth or you will
suffer loss.

How to Prepare For The Crash.

Tips on Managing Money: Have a “Just in Case” fund that cover your total expenses for 6 to 12 months. This will help to boost your “defence”, on top of Insurance coverage.

Also have an “Opportunity Fund/Reserve Cash” approx 25% of your
portfolio. Opportunity Fund is cash set aside to take advantage of rare opportunities and bargains. For instance, when stock markets crashed in yesterday, I used it to buy stocks like IDFC at 150-160 levels.

Opportunity Fund is like “reserve strikers“. Only send them in when
you’re almost certain that they will help to score some goals.

The next Crisis may be 3 months to 2 years from now and you would then realise it is very easy to make 50% to 200% returns on your capital if you buy during a crisis.What, I am sharing with you actual experience, not classroom theory.

What about crisis? Typically, a severe crisis comes by every few years
and SMALLER opportunities least once in 3 months. During the last 0%
lower circuit in Oct2007 we have got huge 50% returns in a week in counters like Powergrid.

Let us prepare for the next Crash (whenever it comes) by having proper asset allocation and use leverage wisely.

(Source: Internet)