As in our previous post, we have already warned our readers about a possible stock market crash in 2016 and to stay cautious , in this post we are asking our readers to book profits as we are probably really close to a bubble.The real question now is, will the bubble burst and the stocks crash hugely or we will have a smooth landing.
We are probably very near a stock market crash and the sequence has most probably initiated by now.HSBC technical analysis team has given red alert seeing the current fall in wall Street as the initiating point.The pattern shown by the present level of the stock market is like 1987.
So in this situation what we can do as investors to protect our portfolio.Hedging against the portfolio is an option for big investors in which option contracts are purchased to minimize the risks.
But for retail investors hedging the portfolio is not possible.In such a case what the retail investors should do to protect his money?
If you have asked the same question to Benjamin Graham the biggest stock advisor of the century would have told the following to you:
Sell 50℅ of your holdings and book profit.Use that money to buy bonds.But in India, we don’t require to buy bonds for getting good interest rates.Banks already provide the good amount to interests on fixed deposits.So we can fix the amount for interests in banks.
We can buy physical gold if we want or we can opt for gold ETFs.When the stock market fails investors gets in precious metals such as gold leading to an appreciation of its price.