The Motley Fool

Another stock market crash may be coming. Here’s how I’m preparing

Image source: Getty Images.

This year’s stock market crash caught a lot of investors by surprise. While the market has since recovered some of its losses, the chances of another crash later in the year remain high.

As such, it may be a good idea for investors to think ahead and get ready for a second stock market crash in the next few months. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Stock market crash round two 

Over the past few months, the stock market has put in a healthy, positive performance. However, the global economy is still reeling for the coronavirus pandemic. What’s more, the epidemic isn’t showing any signs of letting up. The number of new cases around the world continues to rise daily. 

Europe seems to have dealt with the virus for the time being, but a second wave later in the year remains a possibility. Of course, it could also be the case that we’ve already seen the worst of it. That would be a positive development for the global economy, but it’s not guaranteed. 

Therefore, the best course of action for investors may be to prepare for the worst (i.e. another stock market crash) and hope for the best. 

Prepare for the worst 

The best way to prepare for another stock market crash without sacrificing gains if the market does recover could be to buy high-quality growth stocks.

Several companies have benefitted from the pandemic, and buying these stocks may help investors ride out the next stock market crash. 

For example, FTSE 100 stock Halma has benefitted from the rising demand for health and safety equipment. Meanwhile, Just Eat Takeaway is profiting from the rising demand for takeaway food. Investors who owned these companies at the beginning of the year have seen attractive returns on their investment, despite the pandemic. 

Further, as many FTSE 100 companies have slashed their dividends, supermarkets have turned out to be steady income investments in a time of crisis. 

Conversely, it may be sensible to avoid companies that struggled in the last stock market crash. Oil firms were particularly severely impacted as the price of oil collapsed. Banks also suffered. The same may happen in the next downturn, so it could be best to stay away. 

The bottom line 

While it’s impossible to tell what the future holds for the stock market, we can use history as a rough guide. In the last crash, some companies fared better than others.

These businesses may perform better than the rest of the market in the next crash. At the same time, these businesses will likely provide attractive returns for investors if the market continues to recover.

Therefore, owning a diversified basket of these stocks might be the best strategy for investors to follow in the second half.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Halma and Just Eat Takeaway.com N.V. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.