GOBankingRates works with many financial advertisers to showcase their products and services to our audiences.
These brands compensate us to advertise their products in ads across our site.
This compensation may impact how and where products appear on this site.
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information.
you could read more about oureditorial guidelinesand our products and servicesreview methodology.
There are always declines, and that makes investors understandably nervous.
And while downturns are inevitable, a market crash can be particularly concerning.
How can you protect your portfolio from a market crash?
Hereswhat you gotta know.
But is that the right move?
And how do you know when and how to get back in?
Right now, Buffett has built up a significant cash position.
Being in cash means being flexible having liquidity to seize opportunities when they arise, he said.
Capablanca also advised being thoughtful about your purchases when you get back into the market.
The best approach is to average in gradually entering positions as the market corrects.
During a volatile market, the key is to be careful and average in safely, Capablanca said.
Capablanca provided a rule of thumb investors can follow to do this effectively.
The Dreaded One-Day Drop
An investors worst nightmare can be a large drop in a single day.
Big investors, like Warren Buffett, buy on down days.
It can feel counterintuitive to buy while the market is falling, but thats how the best investors operate.
Capablanca, who is an expert on options, recommended considering short selling for the sophisticated investor.
Short selling can play a role, but it requires careful strategy, he said.
For example, when Tesla was at its peak, that was a good opportunity to short.
Capablanca offered some tips for short selling.
You dont want to hold the position too long just a few days at most.
And you must set a stop-loss to limit potential losses.
Additionally, certain stocks are more suited to short selling, according to Capablanca.
Short selling should be targeted at sectors that are overhyped, he said.
Looking at external factors can also provide opportunities for experienced short sellers.
Timing is key market conditions and global events like tariffs or wars need to be factored in.
Can a Market Crash Be Good?
According to Capablanca, a market crash may not always be a bad thing.
Market crashes are actually good if youre prepared.
Instead of fearing them, you should look forward to them.
Those who are prepared and positioned correctly can take full advantage of the situation.
While no investor has a crystal ball, investing is about predicting the future in many ways.
More From GOBankingRates
Share This Article:
