There’s been lots talk of a potential stock market crash in the last few years. And as we head into 2024, the threat lingers. To be honest, I’m not surprised. From the Covid-19 pandemic that saw trillions wiped off global stock markets to worldwide inflation rates surpassing levels not seen for decades, it’s been a tough few years.
Most recently, the Bank of England said the UK economy was likely to see zero growth up until 2025. However, any potential market downturn in 2024 is a chance for me to continue building my portfolio.
Here’s what I’ll be doing to make sure I’m ready.
Remember my goal
First off, I’d remember why I invest. And as a Fool, that’s for the long term.
Volatility is inevitable in the stock market. Plenty of events have led to major market declines, such as the dotcom bubble, the global financial crash, and more recently the pandemic. However, by viewing my investments over a longer timeframe, and thinking in years and decades rather than months, I’m able to disregard short-term concerns.
The S&P 500 is a prime example of this. 2022 saw the index fall by nearly 20%. However, since the turn of the century, it’s returned around 9% per year on average.
As fabled investor Warren Buffett once said: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
Ready to capitalise
With that in mind, I’d also be ready to pounce. By that, I mean I’d use the unique opportunity to purchase shares that are trading for a slashed price.
Market crashes undermine investor confidence and as a result, many panic sell their holdings.
Take Apple as an example. When the stock market plummeted amid the pandemic, Apple shares fell by 30% to $57. Yet today, a share of the tech powerhouse would cost me $182. Investors who capitalised on the opportunity would be sitting on some handsome returns right now.
The final step I’d take would be to purchase high-quality stocks. And for this, I’d look to the FTSE 100. Within the index there’s an abundance of blue-chip companies offering reliable earnings and stable growth.
I’d also target stocks with above-average dividend yields. This is a great way to generate passive income. And this extra cash could tide me over should stock prices suffer in the short term.
Within the Footsie, there are over 10 companies that offer a yield higher than the UK inflation rate. Included in these, I own the likes of Legal & General and British American Tobacco.
Of course, it’s worth noting here that yields aren’t guaranteed, and can be cut or slashed altogether.
Seeing the value of my investments fall wouldn’t be easy. However, by considering the points above, I’d be in a good position for a potential crash. Instead of panicking, I’d use it as an opportunity. Hopefully in the long run I’d be able to see some healthy returns.