Stockmarket correction 2021. If it occurs, are you ready?

Lots of talk about markets being very frothy. Many predicting commodity crashes. I have absolutely no idea if they'll be a crash, dip etc. None.

But I am preparing to take advantage of a correction if it indeed occurs 2021-2022, much like the COVID-19 market crash opportunity.

Anyone else preparing to do the same should it eventuate? Could be another rare opportunity to build some great wealth.

* Not advice in the slightest, just opinion.

 

I'm not preparing for any sort of crash or dip or trying to time the market in any way. However, I'm building up cash in offsets that is primarily intended to be used to purchase a PPoR in 3-5 years time. I'm not completely wedded to that timeframe though so if a great opportunity comes along, I'll take it and put off buying the PPoR for a while.

 

Can you please PM me when you start buying, I’ll be ready

 

+ 1 for defensive, for the moment.

EDIT: Actually, I'm conflating my personal circumstances with the theme of this thread. My position isn't primarily due to some preparedness for a market crash, rather some necessary steps towards a personal restructure.

Were a correction to take place when I'm sorted, well that would be a very nice coincidence.

 

While I would love to play the pick the next market crash game, I won’t. Tried my hand at this a few times and it just didn’t work for me.

Plus I have been hearing the market is going to crash again ever since it started going up after last years covid crash. Missed a 50%-100% market rise, depending on which market your looking at, all while waiting for another 20% crash.

Yes the market will crash again at some point. But why will the market drop by 20% plus in the next month or next few months? The market could go up another 20% between now and the time the market crashes 20%.

Markets being high is not a reason why markets will crash. Something has to shock the markets / economy. Now if I knew what that was and when it’s going to happen then I would be preparing for it. Since I don’t then I will continue on business as usual.

When the next unexpected crash comes along and I feel comfortable to use some low interest debt to buy a little extra, then that is something I might do.

 

Much the same as @PKFFW , currently saving in offset for possible PPOR in 2023 but if something were to happen in the meantime would be more than happy to reallocate some funds

 

This guy has done some interesting comparisons between buying the dips and just plain old dollar cost averaging.

Why Buying the Dip is a Terrible Investment Strategy – Of Dollars And Data

It's hard to argue with the numbers, and although I agree a correction cant be far away, nobody knows when, and nobody knows how big, so just get a plan and stick to it....

 

The thing is when everyone thinks there will be a crash, and sentiment is low, I think it's hard to be able to front run that. If you're planning to pull money out, it's likely that others have already done that before us.

Keep in mind that there's already been some pullback in the markets.

Like others have said, I'm also not trying to time the market and averaging in some money over the next few months.

Attached is an interesting extract from a newsletter I got today about the performance after bearish market sentiment.
I'm not saying I think it will perform this well, just saying that it's interesting because the crowd seems to think the market will go down at the moment.

 

I agree. Sentiment is too low for it to crash this time around. It will happen out of the blue usually when everything is just fine and you are bathing in champagne and caviar and have ordered your fifth Ferrari because things are so great. You and everyone you know are all in, then the rug gets pulled.

 

Black Swan

Right. So if it isn't able to be predicted, my plan based on such unpredictability is going to be.... unpredictable.

 

Black Swan, nah I prefer roasted Swan for a special banquet or roasted chook!

 

We will rebalance from cash/bonds into equities as per fixed asset allocation model in primary portfolios and always keep cash on hand for cap raises in the Microcaps and other opportunistic situations. That is standard practice though and not a view on the market. I won’t be leveraging up in a sell off.

 

At what point in the dip do you buy? 5pct, 20, 40? If you go big in at 10pct down and it drops like the gfc it might be a decade before you get your money back. But yes, if it drops 20pct i would be all in, but no logical reason other than not wanting to miss out.

 

That is known after it happens. Usually well after.

 

Depends on your risk tolerance. Predicting the event is largely impossible.

But being ready to capitalise on such an event should it play out is very doable.

I would do similar to what I did when markets crashed during COVID. Broadly speaking, At 20% drop, enter a position, at 30% drop, enter a position. And every 5% drop from there, enter even larger positions.

Though at the time I had very little invested in the stockmarket so the crash itself didn't affect me at all.

 

When The Larry Swedroe 5/25 Rule tells me to

 

After the recent dips the NASDAQ is down in total about 8% from its early September high, and the SPY is down 6% from its high. Rising 10 year yields hurt the tech stocks, and the talk is that inflation is not going to be transitory.

Could be more dips to come, though I'd expect to see some new (bad) information if that happens.

In comparison, the COVID drop was 35% top to bottom over a few weeks, then a few weeks later was only 15% below. Fully recovered after 6 months (on the SPY). The Australian market took more than a year to recover though, not as many dip buyers here

I feel like our own market hasn't had the massive run that the Americans had and returns have been poorer. I'd like to think that any crash will hit the SPY harder than it will hit our local market. My next buys I'll just be getting more A200 index fund to lean more locally. Aussie dollar is down too so I'm not keen on converting any more into USD.

 

No cash to invest? Then:

 

I agree. I must admit, I've become quite 'lazy' in transferring from property to shares, in that I buy as I have sufficient funds. Buying LICs and ETFs, they'll go up and they'll go down. I'm in this game for much longer than I am for property and I'm much more comfortable with LICs and ETFs (was always slightly fidgety with single stocks), so I'm happy to ride it through the ups and downs, and let the managers time the market for me.

 

1987 was a crash.
What we may see is slow downfall and recession like the 70s.
The 90s was a mild version of it.


And buying the dip makes more money. In practice and theory.
Of course you need to define the "dip", it's easy to make it look like it doesn't.