With the stock market ending 2018 with the worst December since the Great Depression, it's not surprising that there are rising fears about the possibility of a stock market crash in 2019.
In December, the S&P 500 officially entered correction territory. The United States has been in the longest-running bull market in history, and this caught many investors by surprise.
While there are some stock market concerns in 2019, this doesn't necessarily mean that a crash is on the horizon. That's the thing about stock market crashes - they're almost impossible to predict.
Even so, it helps to be prepared. Having a preparation plan is the single most important thing an investor can do right now.
You Must Act Now: America is headed for an economic disaster bigger than anything since the Great Depression. If you lost out when the markets crashed in 2008, then you are going to want to see this special presentation...
Here is why a downturn could take place this year - and the best steps you can take now to protect your portfolio from a potential stock market crash in 2019...
Why a Stock Market Crash in 2019 Is a Possibility
There are several catalysts that could lead to a stock market crash this year.
The first is an escalating trade war with China. What has already taken place has impacted major companies such as Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM), and there could be more to come.
Brexit also threatens world financial markets. Even though this was passed over two years ago, no one has any idea how this is going to turn out, and uncertainty is not a friend to currencies and stock markets.
"Brexit day" is now set for March 29, 2019, and the impact could be severe if this moves forward.
The U.S. Federal Reserve also continues to rattle the stock market. If rates continue to rise, the stock market is going to react accordingly.
Here are some tips on how to prepare for a stock market crash - and how to protect your money if the markets continue to be extremely volatile...
Prepare for a Possible Downturn with This Protection Plan
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No one is saying that a stock market crisis is inevitable, but the evidence doesn't paint the most positive picture. No matter what the market is doing at any given moment, it's essential to be prepared for a shift.
There are several things you can do to protect your wealth in the event of a stock market crash. In fact, some investments will even make money in the wake of a market tumble.
The first recommendation is to buy gold, since the precious metal is a useful hedge against a volatile market. Historically speaking, gold held its value during the 2008 financial crisis. The Dow slipped 49% throughout the crisis, and gold went up 5% over this same period.
However, you don't want to put all of your cash in gold. Money Morning Chief Investment Strategist Keith Fitz-Gerald recommends dedicating as much as 5% of your total portfolio to this type of investment.
It's simple enough to buy gold with something like the SPDR Gold Trust ETF (NYSE: GLD). This is a fund that you can buy and sell just like a stock, and it closely matches the changes in the value of the precious metal.
Another investment strategy is to short the overall market. In essence, you are betting that the market is going to go down and will make money when it does.
Traditionally, shorting stocks requires that you sell borrowed shares and then buy them back at a pre-determined date. If share prices drop, then there is a profit. This is risky because you would need to make up the difference if the share price goes up. The potential losses don't really have a limit if the market takes off, and this is a turnoff for many investors.
This approach should only be taken by investors willing to accept more risk.
Fortunately, there is a simpler and less risky way to short the broader market. Keith recommends buying the Rydex Inverse S&P 500 Strategy Fund (MUTF: RYURX). This mutual fund has a value that moves inversely to the S&P 500. In other words, as the S&P 500 goes down, this will go up.
There isn't exposure to unlimited losses with this investment since it isn't a short contract. But there is a risk, so Keith recommends using this as a hedge against a downturn.
The third recommendation is to buy stock in companies that operate in industries that are "Unstoppable Trends." According to Keith, these are firms that have their hand in must-have industries, meaning they will persevere through any market conditions.
If you look at recent stock market crashes, they were all based on some form of speculation. The 2008 stock market crash involved speculation in real estate and mortgages, and the 2000 dot-com crash stemmed from risky speculative deals in the tech sector.
Putting money into an investment just because others are doing it is a recipe for disaster. People invested in anything having to do with the Internet in the run-up to the 2000 dot-com crash. The Nasdaq, which is heavy with tech stocks, skyrocketed 571% from 1995 to the market peak in March 2000.
When the tech bubble popped, the entire market fell, but some industries and stocks were sheltered from the worst of the aftermath. According to Keith, those are the industries to target.
His top Unstoppable Trend plays are Becton, Dickinson and Co. (NYSE: BDX) and Raytheon Co. (NYSE: RTN). No matter what is happening with the market, these defense companies are always in demand.
BDX provides one-time-use medical supplies for healthcare facilities. These will always be in demand, and more so as the population continues to age.
RTN is a leader in defense worldwide. It is this country's third largest defense contractor. And since there will always be a need for these types of services, this stock will continue to perform.
The last recommendation to prepare for a possible stock market crash comes from Money Morning Trading Specialist D.R. Barton, Jr., who recommends that investors use any downturn as an opportunity to buy top stocks at discount prices.
According to Barton, a stock market crash would be the perfect time to pick up shares in any of the Fab Five tech stocks. These include Apple Inc. (NASDAQ: AAPL), Microsoft Corp. (NASDAQ: MSFT), Amazon.com Inc. (NASDAQ: AMZN), Facebook Inc. (NASDAQ: FB), and Alphabet Inc. (NASDAQ: GOOGL).
This makes complete sense because there have always been corrections and pullbacks in the market, and the Dow recovers every time. These are short-term events, and the best stocks will rally back to shoot past their pre-crash prices.
If these are companies that you've wanted to own or wished you had more shares of, these downturns are an excellent buying opportunity.
There Aren't Any "Safe Spaces" to Protect You from the Next Financial Disaster
America is headed for an economic disaster bigger than anything since the Great Depression.
If you lost out when the markets crashed in 2008, then you are going to want to see this special presentation.
Because if you don't act soon, the effects on your financial future could be more severe than anything you have ever experienced.
Don't wait - You can see all the details right here.