After the fastest correction in history, how should investors respond to this stock market crash? In this first episode of the Michael Jay Show we discuss this crash in context, where market valuations stand, and some investing strategies to navigate stock market volatility. Subscribe here for more content: http://bit.ly/SubscribeMichaelJay

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This podcast-style video was inspired by the popular Joseph Carlson Show which I recommend you check out here if you enjoy this style of investment content:    / @josephcarlsonshow  

Weeks like this can be quite unnerving, even for experienced investors. What helps though is knowing you won't need this money tomorrow and that you are investing for the long term. If you frame your decisions in the context of the impact 10-20 years from now, it makes it a bit easier to handle emotionally. Holding quality stocks that you don't need to sell and which you bought at a good price helps. Indexing can work long term too, on the condition one continues to DCA in and doesn't sell. Asset allocation is the primary method to manage risk in a portfolio, and a crash like this week is usually a good test of your risk tolerance to see if you need to make adjustments (e.g. less stocks, more bonds).

If you have a long term plan in place, I don't think this recent correction should derail that. Though it may make sense to build more of a cash reserve over the next month or so for potential opportunities going forward. This will also help balance the current equity risk in a portfolio. If you have any speculative stocks, short term trades, or investments that you don't have long term conviction in, it may be worth trimming those to raise cash, reduce risk, and focus on the long term opportunities.

* Consider building up your cash reserve over the next month or so for potential opportunities going forward.
* If you have any speculative stocks, short term trades, or investments that you don't have long term conviction in, it may be worth trimming those to raise cash, reduce risk, and focus on the long term opportunities.
* Hold on to quality stocks that you don't need to sell and ideally which you bought at a good price.
* Have a watchlist of stocks you would like to own (or add to) at favorable prices ready if we see further declines.
* Indexing can work long term too, on the condition one continues to DCA in and doesn't sell.

As for strategies/tactics, I would think about your risk tolerance and what long term asset allocation likely would be suitable for you. For example, let's say you are thinking (in a situation where valuations are reasonable) that you would be comfortable with about 60% stocks in your portfolio. Then given your 10% current allocation, you have about 50% of your portfolio ready to use opportunistically to purchase stock assets at reasonable prices (this applies for both indexing and individual stocks).

One strategy is that you could earmark your cash reserves to be deployed at different tranches. For example deploying some capital at 15% down, 20% down, 30% down, etc. This way you gradually increase equity exposure as the future risk/reward becomes more favorable when the price declines. This is generally the strategy that I plan to use going forward, though I will likely be fairly conservative in my purchases until this plays out more. The key here is that it doesn't have to be an "all-or-nothing" approach of selling everything then trying to time the bottom to go back into the market. Unfortunately some people do this, and while a few get lucky, most don't.

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DISCLAIMER: This video is a resource for educational and general informational purposes and does not constitute actual financial advice. No one should make any investment decision without first consulting his or her own financial advisor and/or conducting his or her own research and due diligence. There is no guarantee or other promise as to any results that may be obtained from using this content. Investing of any kind involves risk and your investments may lose value.

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Michael Jay - Value Investing