Baby Boomers Selling Their Stocks Might Tank the Market, Says Expert: How to Prepare for a Crash
Investors in the Index funds are heading towards a complete calamity as pointed out by The Bear Traps Report founder Larry McDonald. He said that these investors don't directly pick stocks but instead trust a fund manager or even exchange-traded funds that track a variety of stocks. In his tweet, he shows concern about so many people simply betting their complete life savings on a small number of Big Tech stocks that currently dominate the market. He also calls out the baby boomers who currently hold a large number of stocks but are beginning to sell out, pushing the economy into a market crash.
Passive investing idiocy will go down in FLAMES 🔥- everyone long the same stocks - all the retirement plans at risk - the oldest Boomers and their $78T of wealth are near 80, starting to cash out. Wake up.— Lawrence McDonald (@Convertbond) July 8, 2023
In another tweet, McDonald talked about how the Feds cannot help delay the recession for eternity. "The Fed can do whatever it wants, but it can't change the essential nature of capitalism," McDonald tweeted. This is not the first time McDonald's has shown concern for the US economy. In May, he said that the S&P 500 might plummet to around 3,000 points by December, which is a 40% drop.
Baby boomers are also investing
While many retirees still believe in the age-old concept of transferring their investments to bonds with time, many are continuing to try their hand in the stock market, ignoring the more conservative approach. In Vanguard, almost 70% of their portfolios are held in stocks by people older than 55. At Fidelity Investments, almost four in 10 investors are between 65 and 69. They are investing and staying in the stock market as many of them find no better alternatives.
Wayne Winquist, 72 told WSJ that cash and bonds both lose to inflation and which is why he relies on stocks. He invested 70% of his $3 million fortune in stocks that pay him dividends. People who stick to stocks believe that everything is risky when it comes to the economic crisis, so the popular opinion is to take risks that pay more.
How to prepare for a stock market crash
It's natural to worry about your portfolio in times of economic crisis but you should always analyze before taking any rash decision that can completely ruin your portfolio. Here are some mistakes one should avoid.
1. Selling in panic: We all know how everybody selling at once can do more damage to the stock market and already bear market. Historic data reveals that the best and worst single-day market performance has never been very far from each other, so it's always a good idea to wait it out.
2. Focus on the long term: We have heard financial experts point out how the stock market always recovers. While the market is bound to be volatile in the short term, long-term investments can shield you from all the small ups and downs. If you adhere to this tip, all you have to do is nothing, when the market crashes.
3. Diversify your portfolio: Like McDonald pointed out, having stocks of a handful of biggies is never a good idea. The idea is to mindfully balance your portfolio so that when the bear market arrives you are still afloat.
Other ways to protect your wealth from inflation
Hedging your wealth against inflation is extremely crucial for long-term good financial health. There are certain ways one can shield their money from inflation.
Buying precious metal: Investing in gold has proven to be quite an effective way of shielding wealth.
Never let cash sit: Always invest in items that will appreciate over time. Here's where stocks come in, as they can be a great liquid asset and therefore, a good investment option. Another great way to protect your wealth from inflation is investing in foreign exchange.
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