We get more pain from losses than pleasure from gains—which might explain why I often think back on the five major market crashes that have occurred during my investing lifetime.
For months after, commentators harped on the possibility of a recession that never came to pass. Anyone who listened missed a great opportunity to buy stocks at bargain prices. Are the talking heads talking? Try mightily not to listen. Nothing could be further from the truth. To invest successfully, we need to stand apart from the crowd, never purchasing something we don’t understand and never buying just because others are doing so. That doesn’t mean we should be knee-jerk contrarians. But it’s crucial to diversify broadly, while shunning big bets on the market’s most popular merchandise.
On top of that, the housing boom and bust involved a large, undiversified, illiquid and often leveraged asset. If you own a diversified stock portfolio, you can’t lose everything, unless you buy on margin. But with homes, leverage is a way of life—and it’s all too easy to have your home equity wiped out.
But 18 months later, the economy started contracting and, soon enough, the reverberations from soured mortgages were pummeling the world financial system. The global economy’s interconnectedness was never more apparent. You and I may be sensible. But that doesn’t mean we won’t pay a hefty price for the speculative excesses of others.
Instead, I’d argue that honor goes to Japan’s three-decade bear market. Imagine it’s 1989 and you’re a Japanese investor who suffers from home bias—the preference for investing only in local companies. Today, almost 30 years later, you’d be sitting with shares whose prices have been almost cut in half, and your financial dreams would likely be in tatters.
No one who bought a home in 2004, 5 or 6 is likely to ever forget the housing market crash. That mistake will follow them the rest of their lives.
How to survive a market crash? Have disposable income, own your home , have income properties. Oh, & cancel the European river trip.. that last one really kept us above water 💧
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Stay away from windows. ....... LMAO !
Right after the 1987 market crash, Reagan’s Fed gave a 75 bps rate reduction, and the GDP went over 4 percent. realDonaldTrump
Dont trade
Sell the high.... Buy the low
I am 1000% confident stocks are the game in town!
I know some co-workers who are 100% stocks in their 401k portfolio and have done extremely well. But I guess time will tell how good this strategy is when it’s retirement time.
U mean like diversification and discipline? Not taking more risk than you should be BEFORE a crash? Not panic selling? Focusing on long term goals?
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