Editor's note: When the "Melt Down" arrives, perspective and experience could mean the difference between keeping a cool head... and making all the wrong investing decisions.

True Wealth editor Steve Sjuggerud believes these two traits can help you hold onto most of your gains when the bull market ends. In short, if you make a plan now – and keep a level head when stocks start to fall – you'll fare much better than investors who don't prepare.

But if you don't want to lose everything, you'll need to do more...

In today's Masters Series, adapted from the January issue of True Wealth and the October 27, 2020 issue of DailyWealth, Steve details a third strategy that can help you get ready for what's to come... and reveals what he expects from the market in the near future...

Preparing Today for the Harsh Reality of the Next 'Melt Down'

By Steve Sjuggerud, editor, True Wealth

My friend, I have some bad news for you. I hate to say it. But it's just the nature of these things...

When this "Melt Up" ends, and the "Melt Down" is in full effect, everyone you know will lose more on the way down than they made on the way up.

Everyone.

I hate it. I know that this will even happen to many people reading this essay. Most embarrassingly, these folks will do it to themselves.

I can put up all the "Caution: Cliff Ahead" signs in the world. However... at the peak, people will fall in love with their stocks.

They will believe they know how to make money... They will believe their stocks will come back... And ultimately, they will ride them a lot lower. The powerful uptrend reverses, and it becomes a powerful downtrend.

However, I also have some good news...

Losing everything in the Melt Down is an entirely avoidable situation. It doesn't have to happen.

But to avoid it, you must start thinking differently. You must start thinking like a friend of mine...

Sean Poynter grew up in a house 100 yards away from mine in Florida. In 2018, he became the world stand-up paddle boarding champion.

He was the underdog from Florida's small waves. But he beat the best surfers in the world, in the best waves in the world, to achieve that goal.

How did he do it? His answer surprised me.

Of course, he trained hard, both on land and in the water. But he also did something else that I didn't expect...

"Visualization," he said.

"I visualized myself winning each heat in advance," he continued. "I visualized what I would need to do, in every possible way. I repeated this in my head, multiple times a day. And then I simply went out and did it – I did what I had already achieved in my head."

Impressive stuff for a young man in his 20s. Sean went "all in" on dialing his brain to do the right thing when a tough situation arrived.

I'm not talking about "positive thinking." Sean didn't just picture everything going his way. Instead, he thought through every possibility... so if something went wrong on the big day, he knew he'd be ready.

After he explained that to me, I decided to try it for myself...

At our 2019 Stansberry Alliance conference in Las Vegas, I had the opportunity to play guitar on stage with Mike Dawes – who was basically voted "best acoustic guitarist on Earth" for two years running.

I didn't want to make a fool of myself. I wanted to entertain our readers, and I wanted to hang in there with Dawes. So I prepared myself as best I could. And I spent a lot of time with my eyes closed, simply visualizing how I would succeed regardless of how badly things went.

Everything went wrong behind the scenes... Mike had some equipment issues, and we didn't get to practice what we were going to play in front of a massive audience. It was just, "You play here, you stop here, we both play here, then we fade out, and it will all be good... got it?" Uh, yeah.

It worked out great. I had nothing... no practice with Mike, no sound check for me. Just a toss into the deep end. (Here's a link to the performance.)

If I hadn't fully prepared mentally for all possible outcomes, I would have been a wreck. Instead, everything went fine, despite the rocky circumstances.

I tell you this because if you want to survive the coming Melt Down, you need to mentally prepare now. You need to visualize what might happen, how things could go wrong for your portfolio, and how you'll react.

This is crucial. The fact is, there isn't a single script you can follow for what's to come. It will get messy... and likely in a way you aren't prepared for.

If you expect a clear signal that the Melt Up is done, you're toast. You'll have no chance to navigate the choppy waters ahead.

While I don't know how things will play out exactly... I know it'll be scary. And the only chance of getting through it is to mentally prepare now.

Yesterday, I explained how perspective and experience will be key to surviving the Melt Down. If you have both, then give the visualization trick a try. It couldn't hurt.

If you're new to the markets, spend a lot of time on this. It could be your saving grace when times get tough in the months ahead.

And they will get tough...

There have been plenty of starts and stops of Melt Up behavior in recent years. And for the most part, stocks were on a one-way cruise higher as we headed into 2020.

It even looked like the final swing of the Melt Up was upon us at the start of that year. But then, COVID-19 crashed the party...

Make no mistake – that bust was painful and record-breaking. However, the recovery since then has been just as impressive. And to me, it has proven a crucial fact...

The final leg of the Melt Up is here. That means you've got to be on board the ride now. But just as important, it means you've got to be ready for the Melt Down.

A lot has happened since the market bottomed last March. The Federal Reserve has pumped trillions of dollars into the financial system... The government has spent trillions on fiscal stimulus... And investors have bid stocks up to dramatic new highs.

A year ago, investors wondered when the market would find a bottom. Now, they're wondering how much higher things could run.

My answer is that they could run far higher than most would believe. This is a Melt Up, after all. The hallmarks are here. And that means prices can, and likely will, soar to stratospheric heights.

Simply put, you ain't seen nothing yet.

That reality creates its own set of the problems, though. Because as longtime readers know, a Melt Down typically follows a Melt Up. And all the gains of the Melt Up go away.

I am not kidding... The market gives back everything it gained during the Melt Up. All of it.

I just want you to realize that we are playing with fire here – 100%.

Based on history, once the general public buys in like it has in recent months, our time is short. Typically, it means we're down to the last 12 months. That means we could see a major market top and the start of a Melt Down by later this year – or sooner.

I don't mean we'll see a market top like we saw in February 2020. That decline could look like nothing in comparison to a true Melt Down.

When the tech bubble burst, the benchmark S&P 500 Index fell by more than 50%. But what was even worse was that the decline lasted nearly three years.

There was no quick fall and rebound like we saw last year. And in a true Melt Down, the market will take everyone down over what could be years, not weeks.

Worst of all, the Nasdaq – the real heart of the dot-com era Melt Up – fell nearly 80% over a similar time frame. It took 15 years to recover those losses.

I don't tell you this to scare you. I tell you this to make you aware of what's happening today... so you are aware of what's possible in the not-so-distant future.

You want to own stocks today to profit from the Melt Up. But you also need a plan to protect yourself in the coming Melt Down... to know exactly when you'll sell.

You can't have any reservations about selling anything you own. It only takes a sliver of doubt when times get tough for you to blow it.

You'll know the companies you own. You'll know their prospects. And you'll come up with reasons why you shouldn't sell...

If you do this, it'll absolutely crush your portfolio. You will risk losing everything – which is what happens to most people in a Melt Down.

Simply put, if you make the mistake of not having a plan for when this all unwinds, you might never recover that money.

Times are good. You want to ride the Melt Up as high as you can. But now is also the time to prep yourself for the Melt Down.

Good investing,

Steve

Editor's note: Steve believes the "Melt Down" will arrive later this year... and those who don't have an exit plan in place could get crushed.

That's why he's sharing an urgent message for anybody who has any money invested in stocks – even if you've never bought a single one of his Melt Up recommendations...

According to Steve, you could face one of the most crucial investing decisions of your lifetime this year. And taking one simple step today could help you take part in all of the upside potential that's left in the Melt Up... and get out with most of your gains when the Melt Down arrives. Learn more about this strategy right here.