‘There for the taking’: Financial expert reveals how to cash in on share market crash

An expert has revealed a smart way to take advantage of the havoc sweeping the share market, with a huge opportunity “there for the taking”.

More than $100 billion has been wiped off the value of Australian shares over the past couple of weeks – and while some have been shouting about how the world is going to end, the smart investors have cashed in on the disruption.

Uncertainty creates opportunity, but taking advantage when markets are turbulent can be scary – so I wanted to cover what you need to know to make the smart moves during market downs and ups, so you come through this period of disruption in a stronger position than you are today.

The share market is supposed to go down

This one is obvious, but it’s worth mentioning – share investments are not the same as putting money into a bank account. There will be periods where share investments go down in value.

Smart investors know this, expect it, prepare and plan around it, and don’t let down periods push them to make bad choices.

You should know any time you invest money there will be periods where it will go down in value – sometimes significantly – and this is entirely to be expected and part of the process. Know that on average, the share market goes up more than it goes down, and over the long term it will increase in value.

Smart investors have cashed in on the disruption. Picture: iStock

You only lose money if you sell

Because investments will go down in value in the short term, but over the long term trend upwards, you should know that you will only ever “lose” if you sell your investments when share markets are down.

So long as you’re never forced to sell investments at a bad time, you can hold onto the investments until their value recovers, and eventually sell them for a profit.

How you can ensure you’re never forced to sell investments is simple, but not always easy. You simply need to ensure you have enough other money outside your investment funds to cover all of the spending you want or need to do.

If you have enough other money to cover all of your spending, you can leave your investments to recover, then grow until they’ve made you the money you wanted when you bought them.

Quality investments is key

I’ve mentioned above that share market investments go up more than they go down, and trend upwards over the long term. This is true, but it’s worth noting that not every single investment available in the share market will go up.

Some companies, and therefore some shares, will perform averagely, and some will go bust. Again this is par for the course and to be expected.

The companies that have higher levels of risk attached to them are smaller companies in more volatile industries and markets, where there is a higher potential for upside, but also a much higher risk of poor performance.

The share market is in chaos. Picture: iStock

On the flip side, the biggest and best companies are more consistent and reliable, both in terms of their company performance which then flows through to their investment performance for shareholders.

The bigger a company is, the more robust its operations will typically be. Big companies have longer track records, more diversified product and revenue streams, and have stronger management and internal processes in place to ride out periods of economic or financial market disruption.

When you invest, if you stick to the bigger and more stable companies, you will typically be rewarded over time with better performance. You will also benefit from having more confidence and peace of mind as we move through periods of share market disruption, knowing the companies you’ve invested into will be more likely to weather the storm.

Diversification is a winning strategy

If you invest in only one company, when that company does well, you’ll benefit, and when it performs poorly, your investments will suffer.

But when you invest into two, 20 or even 200 companies, you “diversify away” your risk by spreading it out across a wide range of different companies, industries and markets.

Traders work on the floor of the New York Stock Exchange amid significant losses. Picture: Michael M. Santiago/Getty Images North America/Getty Images via AFP

When you invest, if you follow a more diversified approach, you’ll benefit from more stable investment returns. You can diversify yourself by buying up a number of different shares in different companies, or through buying one investment fund (like an ETF or through an investment app) that in turn does the diversification for you.

The wrap

Investing is the most effective way to build your wealth and replace your employment salary with investment income.

Any time there’s a market correction, the attention-grabbing headlines talk about all the risks out there for investors, and some people get scared and make reactive, costly decisions.

The smart investors cut through this noise and see the situation for what it is – an opportunity to accelerate their progress and get ahead faster.

It takes some smarts, a good strategy, and the right approach – but the benefits are there for the taking.

Disclaimer: The information contained in this article is general in nature and does

not take into account your personal objectives, financial situation or needs.

Therefore, you should consider whether the information is appropriate to your

circumstances before acting on it, and where appropriate, seek professional advice

from a finance professional.

Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth, and the author of soon-to-be-released Virgin Millionaire. He runs regular free online money education event which you can book here