How to Financially Survive a Stock Market Crash
The US stock market underwent it's first 10% correction in 2018, and now stocks are on the edge of all-time highs, and driven higher by corporate earnings.
But, with global trade tensions growing day by day, rising short-term interest rates, and indications of moving into the late phase of the business cycle, a stock market decline may be on the horizon.
Indeed, Paul Tudor Jones, a hedge fund investor famous for predicting the 1987 stock market crash, is expecting a market crash as soon as 2019. He told Goldman Sachs, that "We have the strongest economy in 40 years, at full employment. The mood is euphoric. But it is unsustainable and comes with costs such as bubbles in stocks and credit." Jones isn't the only one predicting an imminent crash. Scott Minerd, Global chief investment officer and chairman of investments for Guggenheim Partners, told Times that, "The markets are potentially on a collision course for disaster." The majority of financial experts seem to agree: the economy has been too strong for too long, and now, something's got to give.
So, how can you prepare for the inevitable down turn? Here are six tips to help you protect your income in the case of a stock market decline.
Invest for the Long Term
While what goes up must come down, the opposite is also true when you're talking about the stock market. Though the stock market rises over longer periods of time, it's often interrupted by short-term downturns. The short term is ruled by investor confidence, meaning changes can happen quickly. But the long term tends to be more about real wealth creation as companies generate free cash flow and pay down debt. So, your short-term plays should only make up a small portion of your overall investment portfolio, as these can be more subject to damage in a volatile market.
Invest in Individual Companies Instead of Indexes
If the market begins to fall, it's best to have your money in individual companies that you believe in, instead of allocating money to an investment fund that tracks an index. Francis M. Kinniry, head of portfolio construction at Vanguard, told the New York Times that, "It's not an active versus index story, it's high cost versus low cost. They underperform because they're charging too much for the 'alpha' they generate," he added, referring to the return in excess of the market return.
Have as little debt as possible
Debt only gets harder to pay off during a decline in the market. Make sure that you aren't spread too thin on margin (borrowed funds to invest with) when a market crash starts to look likely.
After the last market crash, Europe and Japan were slower to recover than the United States and therefore still have years to go before they crash. Darrell L. Cronk, president of the Wells Fargo Investment Institute, said that the recoveries in Europe and Japan started closer to 2014, as opposed to 2009 in the United States. So, your money may actually be safer invested overseas.
Diversify your Investments
As the saying goes, don't keep all your eggs in one basket. Make sure you don't have all of your money tied up in one place, because then a sudden drop could mean financial disaster. Instead, diversify your stock portfolio, and diversify across different asset classes and regions as well. How you invest depends on your risk tolerance, time horizon, and long and short term goals. Careful diversification can be one of the best tools to come out of a stock market crash financially intact.
Cash is King
Wall Street Journal
Tying up all your money in the stock market is never a good idea. Make sure you have some cash saved to get you through in case your investments take a hit, or some cash in the money market. Your goal should always be to conduct your affairs so that if you were to get laid off or meet some other unexpected cash expense, you would not be on the brink of disaster.
- Is it too late to jump back into the stock market? ›
- The Stock Market Correction: Your Guide And Actionable Advice ... ›
- 3 Quick Tips for Retirement as the Stock Market Heads Into the ... ›
- Cramer's advice for investors who weathered the stock market sell-off ›
- InvestorPlace: Stock Market News, Stock Advice & Trading Tips ›
- Bridgewater's Ray Dalio: Best advice for new stock market investors ›
- What is the best stock market advice you have ever received? - Quora ›
- Stock Market Crash: Why Did the Dow Drop? Investment Advice ... ›
Looking for a job? In addition to encountering those annoying never-ending job interviews you may find yourself face-to-face with an artificial intelligence bot.
Companies worldwide increasingly use artificial intelligence tools and analytics in employment decision-making – from parsing through resumes and screening candidates to automated assessments and digital interviews. But recent studies claim that AI does more harm than good.
While AI screening tools were developed to save companies time and money, they’ve been criticized for placing women and people of color at a disadvantage. The problem is that many companies lack appreciable diversity in their data set, making it impossible for an algorithm to know how people from underrepresented groups have performed in the past. As a result, the algorithm will be biased toward the data available and compare future candidates to that archetype.
The City’s Automated Employment Decision Tools (AEDT) law is designed to offset the potential misuse of AI and protect job candidates against discrimination. It was enforced on July 5th, 2023 in New York City - with other cities and states expected to gradually follow suit. Employers must now inform applicants when and how they encounter AI. Furthermore, companies have to commission a third-party audit of the AI software used, and publish a summary of the results to prove that their systems aren’t racist or sexist. Job applicants are able to request information regarding what data is collected and analyzed by the AI. Violations of the law can result in fines of up to $1,500.
Replacing Human Hiring Decisions
However, should a job applicant want to opt-out of such impersonal judgement by a bot, the new law's scope is quite limited.
While the law specifies that instructions for requesting an alternative selection process must be included in the AI screening disclosure, companies aren't actually required to use other screening methods. Not to mention that the law only applies to AI in hiring and not any other employment decisions. It also wouldn't apply if the AI, for example, flags candidates with relevant experience, but a human then reviews all applications, making the ultimate hiring decision.
Some civil rights advocates and public interest groups argue that the law isn’t extensive enough and that it’s even unenforceable. On the other hand, businesses say that it’s impractical, costly, and burdensome, and that independent audits aren’t feasible.
Responsible use of AI in hiring
Although this law may be a good first attempt to assign more regulatory guardrails around AI, it remains to be seen if it ensures the responsible use of AI in hiring processes. At the end of the day, perhaps recruiting talent should remain a human-made decision.
The good news is that AI can help companies without harming potential job candidates in many ways – such as connecting new employees with internal organizational information and company benefits during onboarding. Or helping employees to do their jobs more effectively rather than replacing them.
There’s all this talk about solo travel. And for good reason — no wasting precious time waiting for others to get their act together, take the plans out of the group chat and actually buy the tickets. Going solo, you can be spontaneous. You can plan your trips according to your precise tastes. You can hop on any flight and fly awayyyyyy.
But what if each time you flew you’d get a free ticket? That’s what you get with the Southwest Companion Pass.
Award status, upgrades, lounge access — there are many perks in the frequent flier game. But one of the coveted holy grails is the Southwest Companion Pass.
What is the Southwest Companion Pass?
The Companion Pass is part of Southwest’s Rapid Rewards program. You get to choose one person to be your “companion,” and they fly with you for free (plus some taxes and fees) on every flight. That’s right. Two for the price of one. That’s half off each ticket if you split it! Whether you’re flying with a partner, family member, friend, or anyone else, they can tag along for free.
And it gets better: once you earn the pass, you can reap the rewards for that full calendar year … AND the next. That’s why people go mad trying to earn a companion pass during the early months of the year. The sooner you qualify, the longer you can use it.
There are also no blackout dates. There are no limits. And if you didn’t purchase the ticket (think: work travel, your companion, or a generous benefactor), there are no restrictions! As long as you’re the one on the plane, your companion can also … be on the plane.
You can also switch out your designated companion 3x a year. So, no need to stay in a relationship simply to get the most out of your companion pass! Ghost and fly away — with a whole new companion!
If this sounds too good to be true — it’s not. But there is one small catch. It’s kinda tough to earn this mega reward.
How to qualify for the Southwest Companion Pass?
You can qualify for the pass in one of two ways:
- Fly 100 qualifying one-way flights
- Earn 135,000 qualifying points in a calendar year.
Clearly, this is no small feat — especially if you’re trying to qualify ASAP.
So how do you actually earn the Southwest Companion Pass?
Don’t worry, there’s a path to earning this amazing reward without climbing on 100 flights or spending an exorbitant amount of money.
Earning 135K reward points may seem completely impossible, but it’s easier than it sounds. Simply sign up for a Southwest Credit Card and turn those spending habits into a rapid rewards account. Through the Rewards Priority Credit Card, earn points when using local transit and commuting, plus score major points and miles whenever you spend.
Stay with me here. This is not some scheme to get you into credit card debt. Many airline cards come with potential savings, giantic rewards, awarding you points, and cashback with every purchase you make that can be redeemed for travel. And often they can come with passive sign-up bonuses. If you spend a specific amount of money within a certain timeframe of opening the card, you can be in for a windfall of points.
Now that’s where the companion pass comes in:
- Southwest Rapid Rewards Premier
- Southwest Rapid Rewards Plus Credit Card
- Southwest Priority Credit Card
- Southwest Rapid Rewards Premier Business Credit Card
- Southwest Performance Business Credit Card
Southwest has three personal cards and a business card. Each of these cards offers rewards between 30K-80K points. In the past, people could open two cards and get a bonus that granted enough points to almost meet the minimum. However, with new restrictions on personal cards, you can only get one bonus every 24 months. Boo!
However, this doesn’t apply to business cards. If you’re eligible, have good credit, and not likely to spiral into insane credit card debt, you can open a business card and a personal card, and accrue 100K+ points. The Rapid Rewards Priority Credit Card will get you points after you spend money in no time.
Now to earn the rest of them.
The secret to gaining these credit card points is to plan your card sign-ups around big purchases. Just before a recent move, I opened a card . . . and the rewards came rolling in — a small balm to ease the pain of how exorbitant moving can be.
Put everyday spend — especially big purchases or bulk items — on your Southwest credit card and watch your award points quickly add up. Typically, you earn 1 point per $1 spent on your Southwest card and 2 points per $1 on actual Southwest purchases.
But there are other ways to earn points, including:
- Flying Southwest: Booking travel on Southwest earns more points. The cost of this travel will be worth it with your companion pass
- Shopping from Rapid Rewards Partners: Purchases with Southwest’s “Home & Lifestyle” and “Shop and Dine” Partners also earn Companion Pass qualifying points. While you shouldn’t make gratuitous purchases, browse Southwest’s partners to see if you could earn extra points for items you'd be purchasing anyway. All this, simply from enrolling in their Dining Program and shopping with their partners.
So there you have it! And since it’s almost Spring, get to earning and soon you’ll be flying two for the price of one!