Preparing for worst will help

Q: How can I protect against a market crash?

A: There’s no way to accurately time a market crash, so it’s generally a bad idea to sell investments in anticipation. Many experts were predicting one in 2015, but the bull market has continued, and the S&P 500 is up 18% since then. People who sold in anticipation of a crash would have missed out on this additional upside.

That logic applies now. The market will eventually crash, but it’s possible we could have a few more years of strong returns first.

That said, it could be a good idea to allocate more of your portfolio to stocks that tend to hold up well during bear markets. Dividend stocks with excellent track records of increasing their payouts are a good example. Shares of companies such as Walmart and Procter & Gamble both handily beat the S&P 500’s return during the 2008 crash. In fact, Walmart gained nearly 20% in 2008 while the S&P 500 lost 38%.

Also, while I don’t advise getting out of stocks in anticipation of a crash, now could be a good time to start raising cash. For example, if you contribute $400 per month to your IRA, you may want to leave your next few contributions un-invested. This will allow you to take advantage of bargains that could come with a market crash.

A crash produces opportunities for long-term investors, so put yourself in position to buy solid stocks at bargain prices whenever the next one comes.