How can I protect my investments from a stock market crash?

To protect your investments from a stock market crash, focus on **diversification, defensive stocks, stop-loss orders, and having an emergency fund**. Staying calm, avoiding panic selling, and maintaining a long-term investment approach are key to surviving market downturns.

1. Diversify Your Investments

A well-diversified portfolio helps reduce risk during a stock market crash. Consider spreading your investments across:

• Different sectors: Avoid overexposure to one industry.
• Multiple asset classes: Stocks, bonds, gold, and real estate provide balance.
• International markets: Global diversification reduces domestic risk.

2. Invest in Defensive Stocks

**Defensive stocks** provide stability during a market crash. These include:

• Consumer staples: FMCG companies sell essential goods.
• Healthcare: Medical companies remain strong in recessions.
• Utilities: Electricity, water, and gas providers offer steady returns.

3. Use Stop-Loss Orders

Setting a **stop-loss order** helps prevent major losses by automatically selling a stock if it falls below a set price.

• Fixed stop-loss: A predetermined exit strategy.
• Trailing stop-loss: Moves up as stock prices rise.
• Volatility-based stop-loss: Adjusts according to market fluctuations.

4. Keep an Emergency Fund

Holding **cash reserves** provides flexibility to buy undervalued stocks during a crash.

• Maintain 6 months’ worth of expenses: Helps cover financial needs.
• Hold 10-20% cash allocation: Allows buying opportunities.
• Avoid excessive leverage: Reduces the risk of margin calls.

5. Avoid Panic Selling

Many investors lose money by selling in fear during a crash. Instead:

• Stay calm: Market downturns are often temporary.
• Hold quality stocks: Strong companies recover faster.
• Rebalance your portfolio: Adjust allocations wisely.