The crash is here and stock markets are plunging. Crypto is in freefall, your pensions are going to be ravaged and not even gold is totally safe… but this is exactly how to protect your finances: PATRICK TOOHER

Stock markets are plunging around the world. Cryptocurrencies are in freefall. And millions of private investors are beginning to panic.

I fear we are witnessing the beginnings of a global crash as the boom in artificial intelligence (AI) stocks turns to bust. The boss of Google warned only yesterday, if that happens, ‘no company is going to be immune’.

It would almost certainly trigger a broader, bigger sell-off that would shake business and consumer confidence, cut investment and spending and potentially cause a global recession.

It would also ravage the retirement hopes of millions of British savers whose pensions are increasingly tied to the fortunes of just a handful of the US tech companies that have come to dominate stock markets in recent years.

The so-called ‘Magnificent 7’ – Nvidia, Apple, Microsoft, Google’s Alphabet, Amazon, Facebook-owner Meta and Tesla – now make up around a third of the benchmark S&P 500 index. It means when they sneeze – as they are doing now – everyone catches a cold.

But it is not just their share prices and those of the wider stock market that are taking a hit. Cryptocurrencies such as Bitcoin are also in the doghouse after enjoying a spectacular run.

I fear we are witnessing the beginnings of a global crash as the boom in Artificial Intelligence stocks turns to bust, writes Patrick Tooher. The boss of Google warned only yesterday, if that happens, ‘no company is going to be immune’

Even traditional ‘safe haven’ assets like gold that offer some protection in times of stock market stress have fallen from their recent record highs.

As share owners brace themselves for results Wednesday night from AI pioneer Nvidia, the world’s biggest public company, what should you do to shield yourself – and your assets – from the stock market storm.

Here are my six tips but remember, everyone’s wealth goals are different so, if in doubt, seek independent financial advice.

1. Quit while you’re ahead. If you are of a nervous disposition, with a low risk appetite, or your investing horizon is short term – or you just need the money – then consider selling some of your holdings. 

Shares have had a spectacular run – even after its latest dip, the FTSE-100 index is still up almost 16 per cent this year – but that cannot last forever.

Now could be a good time to cash in on some of those gains in case there’s a full-blown crash. As the old stock market saying goes, nobody ever went bust taking a profit.

The Daily Mail’s Consultant City Editor Patrick Tooher advises no to second guess the peak for stock markets – or ‘buying the dip’ after a sharp fall. It’s a mug’s game, he writes

2. Don’t try to be too clever. Attempting to second guess the peak for stock markets – or ‘buying the dip’ after a sharp fall – is a mug’s game.

Some of the most highly-paid professional money managers have missed out on spectacular returns in recent years after calling the top of the market too early so don’t try to beat them at their own game. The combined wisdom of some of the world’s finest minds – and their funds’ algorithms – will almost certainly be greater than yours.

3. Be diverse. Shares offer higher returns over time, but they also come with risks, which may be above the tolerance levels of more cautious savers. To spread that risk it is best to diversify – in other words, don’t put all your eggs in one basket.

That is easier said than done because, even if you have a low-cost fund that passively tracks major stock markets, a big chunk of your wealth will be tied to the fortunes of a handful of the tech giants whether you like it or not.

4. Buy gold. The yellow metal is a classic safe haven in times of financial turmoil. It has hit a record of over $4,000 an ounce this year, mainly on the back of persistent buying by central banks, but there’s nothing to stop it going higher still if investors continue to lose faith in stocks and shares.

Patrick Tooher recommends buying gold, a classic safe haven in times of financial turmoil

5. Be boring. They may be dull and unexciting, but utilities like electricity and water companies are one the best performing sectors this year.

If you think AI is here to stay – even if the sector itself is overvalued – then there is going to be huge demand for the resources needed to power data centres and other physical kit that sit behind the revolutionary technology. 

Bricks and mortar stocks like utilities also pay good dividends, which provide useful income for savers.

6. Stay invested. History shows that in the long run shares do better than other forms of investments, such as cash in a savings account or supposedly ‘safe’ government bonds.

It may take months, or occasionally years, but stock markets always rebound after a crash. 

As the old adage goes: It is time in the market, not timing the market, that ultimately pays off. As tough as it may feel now, keep the faith and, if at all possible, resist the temptation to sell.