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How do I prepare for a potential stock market crash in 2022?


I think the conditions are right for a stock market crash in 2022.

I am not taking this statement lightly. Many investors, including me, can lose a lot of money in a market downturn (at least temporarily).

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However, it seems to me that there is growing uncertainty around the world, and that this could result in market selling.

Risk of catastrophe in the stock market

There are several reasons why the market may start to fluctuate in 2022.

Last year, central banks released cash tide waves in financial markets to blunt the effects of the epidemic on the world economy. This strategy has worked, but some analysts are concerned that markets are now tied to cheap money.

As central banks begin to withdraw their support, this could lead to instability. Higher interest rates could lead to lower equity valuations, and a decline in money laundering could lead some investors to reduce exposure to risky assets such as equities.

Another challenge for the market is rising inflation and the supply chain crisis. These factors are driving up costs for companies, which can ultimately hurt profit margins and profitability. Lower corporate profits could lower share prices.

In addition to the above, the threat of an epidemic is still roaring in the background.

Considering all of the above, I am looking for ways to protect my portfolio in the event of a stock market crash in 2022.

Protection against uncertainty

It will never be possible to completely protect my portfolio from crashes. Still, I would buy some assets to protect my assets from uncertainty.

The first is age-old safe haven, gold. I will invest in these assets through an ETF to protect my portfolio against market volatility and inflation.

In addition to a Gold ETF, I will acquire a basket of high-quality consumer goods stocks. Companies like Racket And Diageo The well-known brand has its own portfolio and has proven itself in the last two years.

While past performance should never be used as a guide to future prospects, I think Reckitt and Diageo’s global reach and strong brands will help them navigate further market and economic uncertainties.

And I will add some international exposure to my portfolio by acquiring Apples. The company has a loyal fan base and sells must-have products and services on a subscription basis, the latter providing a steady recurring revenue stream.

I think these single stocks might be the right investment to help my portfolio in market crash weather. However, their performance is not guaranteed. If consumer spending suddenly declines, these businesses may also suffer a loss of revenue.

Diversity

By adding an investment fund to my portfolio, I think I can overcome some of the risks associated with buying a single stock.

For example, I will add Rise of the LF Blue Whale My investment bucket funds. I am attracted to this fund because it focuses on buying companies worldwide with high profit margins and competitive advantage. These qualities should help this business navigate the economic uncertainties.

Not without the risk of the funding system. If Blue Whale fund managers choose the wrong investment, I risk putting myself at risk by not realizing it. This is something that I will keep an eye on as we move forward.

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Rupert Hargreaves owns shares in Diageo and Reckitt plc. The Motley Fool UK recommends Apple, Diageo and Reckitt plc The opinions expressed about the companies mentioned in this article may differ from those of the authors and therefore the official recommendations in our subscription services such as Share Advisor, Hidden Winner and Pro. Here at The Motley Fool, we believe that considering different perspectives makes us a better investor.





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