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Those who survive a market crash usually are very diversified: they spread their money out into many other things. Diversification is extremely important as an investor. Anything can trigger off a market crash. The sub-prime lending crisis has caused a terrible lack of confidence in the liquidity of the real estate marke-still causing incredible gyrations up and down in stocks-as the spectre of 1970's style inflation brought on by astronomically high oil prices starts to haunt the markets. The NASDAQ meltdown over tech-stocks, when before that, anybody and his or her uncle could create just 'paper-based' companies with little or no feasible liquity.

Remember, stocks are basically just paper assets that go up and down on speculation, rewarding, financially hurting or ruining an investor. Although rules have changed since the 1987 stock market crash, investors can still use more credit than actual cash in buying stocks. As an investor, it is important to have liquidity. Wall Street can be like Las Vegas-an incredible gamble that can reward the investor well. Keep liquidity by using less credit and investing within your means. If you start to make money, carefully re-invest it into a more diversified portfolio that includes T-bills, bonds, commodities such as gold and silver, and other more diversified financial assets that are all, or in part, sometimes are referred to as the "flight to quality" during times of financial panic. These stronger financial assets can help anchor your less tangible stocks.

In the ensuing panic of the crash, you may be caught up in the stampede for the doors. If you're assets are well-balanced between paper and hard assets and your liquidity is good, you may not have to sell at any price (hence the crash)to save whatever monies you can of your original investment. You may loose a small fortune, but the market always rebounds, giving you huge opportunities to re-liquefy your assests, even if there is a Bear market. The rollercoaster ride in the market in 2008 has shown huge and deeply profound You can regain your initial investment and maybe even make a substantial profit as the undervalued stocks soar in rebound rallies-as confidence is restored in the market with soothing Fed action and more liquidity is pumped back into the market through the Federal Reserve.

Update as of Dec. 2008-The USA and much of the world is mired in a recession that has all the feel of a 1930's depression: bank failures, mortgage defaults, a tsunami of bankruptcies, little or no liquidity, and skyrocketing unemployment figures, and a stock market that has seen much of its value reduced, in the beginnings of a deflationary-cycle, that could become hyperinflationary as global budget deficits skyrocket. Even in this market, many have survived by carefully investing their money into the stock market when the 'relief'-rallies have come, also putting part of their monies into safe government securities, and carefully buying depressed properties that have the ability to greatly appreciate.

There are always opportunities to not only survive a stock market crash, but to prosper well if an investor is smart, prudent and a great strategist, with proper financial advice and consulting. With a keen eye, any investor will not only prosper, but can even become very rich, as many have from the great depression, onwards. Even with the New York Stock Exchange down 34% for the year, reminiscent of the 1930's depression.

Learn more about this author, Todd Daigneault.
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