The S&P/ASX 200 Index (ASX: XJO) has entered into a bear market, down 23% from its all-time highs at the time of writing. Here is how to survive this ASX stock market crash.
Keep calm and carry on… investing
Investing is, by definition, for the long-term. Keeping this at the forefront of your thinking is crucial to help deal with the increased volatility brought about by the recent COVID-19 outbreak and oil price drop.
Over the long-term, the stock market has provided returns of around 9% per annum. However, the stock market very rarely goes up by exactly this amount in any given year. This return is generated by a number of significantly worse years and a number of significantly better years. Staying invested (if you can) over the long-term will help to ensure that you don't underperform the market, missing out on life-changing gains.
Look at your stock portfolio less
When the market drops as quickly as it has, it's scary for every investor. It is critical not to make emotional decisions based on the current sea of red in your portfolio.
As humans, we are flawed from a number of biases. One of these is that we feel the pain of loss more strongly than the joy of gain. Looking at your portfolio daily, hourly or by the minute is likely just going to make you feel bad. Looking at your portfolio less and being aware of your own flaws will help soften the pain and make you a better investor.
Hold and deploy cash appropriately
In order to successfully carry on investing, you need to be able to pay your bills and sleep at night. Ensuring that you are only investing with cash that you don't need for the next few years is one way to do this.
If you have some investing cash set aside, the coming weeks, months or year could be a great time to methodically buy into or buy more shares in high-quality businesses at cheaper valuations. The lower oil price and economic impacts of COVID-19 will be felt by the broader economy, but some companies will be affected more than others.
For example, as social distancing is implemented across the globe, people will be looking for alternate sources of entertainment. One such company which may benefit from this trend is Netflix Inc (NASDAQ: NFLX). As a subscription business, new customers could prove sticky.
Alternatively, ASX travel companies such as Webjet Limited (ASX: WEB) and Corporate Travel Management Ltd (ASX: CTD) are being directly affected by COVID-19. At the time of writing, these ASX travel shares are down 61% and 58% respectively in the last two months. Investors are factoring in significant pain for Webjet and Corporate Travel, which could provide a buying opportunity. For now, I'm waiting for some more concrete information from the companies.
