Reading Time: 2 Minutes
I read an interesting article this week on lessons learnt through 150 years of stock market crashes.
Albeit the article was skewed towards the US stock market, I still feel like the lessons are pertinent across any asset class.
Especially as how the markets these days are looking CHOP-PEI to say the least.
It also reminded me that it’s now marked 5 years since the depths of the COVID crash.
5 years… wow.
Life’s certainly changed since.
But enough nostalgia, let’s look back fondly on all the market crashes in the last century and a half:
I think the main lesson is quite evident here, just hold on.
If you can hold on, eventually you’ll make it out alive.
On average, market corrections (-10%) happen every two years and recover within 4 months, bear markets (-20%) show up roughly every four years and take a longer 19 months to hit rock bottom.
Inevitably, markets move around based on the delightful mix of economic, political, and psychological reasons.
Sometimes, it’s a trade war. Other times, it’s interest rates. And other times still, it’s cos our leader of the free world has itchy fingers on da socials.
But I think the biggest lesson, and one that was not mentioned in the article, is that during those painful years of market declines – life still goes on.
I mean yes, SAYING it takes 19 months to hit rock bottom is one thing, but LIVING through 19 months of markets hitting rock bottom is another.
Just look at one of the most recent downturns – the lost decade:
That period covers the dotcom bubble (and burst), the subsequent recovery, GFC highs (and crash) and then recovery through the great recession.
It’s easy to visualize it in a graph – but actually going to work everyday, raising kids everyday and generally just doing life every. single. day… through economic volatility and turmoil for a full TEN years is not.
That’s something different altogether, and one which cannot be encapsulated on a graph.
So I think it’s easy to be told to just “hold on” when things don’t go our way.
But no one factors in all the other shit you have to deal with whilst trying to “hold on”.
My biggest lesson then – is not simply to just remember “this too shall pass” or some other bumper sticker.
No – my biggest lesson is to be prepared, to hope for the best but expect the worst.
Always have a cash buffer, don’t use leverage and invest within your risk tolerance.
That way, whatever shit happens – at least you’ll be able to SURVIVE.
And that’s the most important lesson of all.
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Sponsor’s Note:
Another quality post from TheFrugalSamurai if I say so myself.
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If not, now is the time for a quick review of your lending, there’s some pretty incredible pricing out there.
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P.S. Every post is the personal opinion of yours truly, please seek your own personal financial advice regarding your own personal circumstances.
