Making Money in the Stock Market Crash - How I Am Doing It

You do not have to look very far to see news about the turbulence on the stock markets over the last few weeks and months. Few people will have escaped the recent falls in stock prices without some losses in their stock portfolios. In this article I will explain the investing strategy I have used to navigate my portfolio through the crisis and still return a profit of over 10% over the last two months.

If you are thinking about investing in the sock market or want to know where to invest your portfolio or savings in these turbulent times then this will hopefully be the most important article you have read for a long time. In it I will share the exact methods I have been using to make money during the credit crisis.

The recent crash in the worlds stock markets have manly been due to the faltering banking sector. The cause of the problem is that the banks in recent years had invested huge sums of money in sub prime mortgages. Once house prices started falling in the US people started defaulting on their mortgages making these investments turn heavy losses.

The above sub prime mortgage crisis was the start of the problems. As time progressed in the latter half of 2007 various banks started announcing huge losses as a result of their investments in the sub prime mortgage market. As more announcements were made banks suddenly became very wary of lending money to each other because they did not know how big the potential losses were on each others sub prime investments. Banks rely on borrowing off each other to fund their activities (such as giving us mortgages) so suddenly banks were unable to borrow money to fund their activities and as we are seeing now many filed for insolvency.

So how does all of this relate to my stock investments? Well the above credit crisis has manly affected the major indexes such as the Dow Jones and FTSE. What has not really been publicized is that the impact on smaller companies has been minimal because they rely far less on funding their activities from the large banks.

Finding information about these small cap companies can be a challenge. I am subscribed to a service that sends me a short list of companies that are undervalued. The list is produced by a computer that analyzes company data of thousands of firms looking for signs that they are undervalued. This saves me a huge amount of time that I would have otherwise wasted investigating stock I ended up not investing in.

Of the stocks in this shortlist I then conduct my own analysis on each company, filtering out any stocks related to banking or financial sectors. I do basic research such as look at their websites, gauge professionalism by clang their HQ and requesting a copy of their annual reports. Google can tell you may things about a company in just a short period of time. Use this tool to your advantage.

In addition as investors sell their stocks in major indexes some of the funds is being invested in these small cap companies, pushing the prices up, making me more money.


Good luck and I wish you profitable investing!

By James McKerr