There is something very powerful about the stock market.
Something no human being can really explain or can truly understand.
No matter how low the stock market goes, it always bounces back!
It Was The End of The World… 5 Years Ago!
Do you remember your summer of 2008? I certainly do! It was part of my first “real life” experience when the market suffered from a correction. The word “correction” is pretty small in this case. I could have used the word “disaster” instead. Some of the World’s biggest banks collapsed, Lehman Brothers even went bankrupt and suddenly, GM was synonymous with General Maelstrom.
I remember the craziness, the panic and all the assumptions:
Capitalism is dead.
Banks are going to close.
This is even worse than you think it is (how could it be? It’s the end of the world???)
The Black Swan Rhetoricians were brought in mass onto Oprah’s TV show to explain how this was inevitable. Investors lost faith in the market and traded their shares for bonds by billions. The world had changed and it will never be the same…for at least 18 months, right?
5 Years Later, We are More Capitalist Than Ever
I’m sure you have read the headlines over the last month: The Dow Jones at a new peak, the S&P 500 breaking a new record. We are now aiming for new highs in the market a scant five years after the worst stock market crash in history. I can say that my first two kids have survived the end of capitalism…
Five years later, I’m asking what has truly changed? Nothing. There are absolutely no differences between the world before 2008 and the world after 2013. Only 5 years of investing turmoil and we are back to square one. The big guys on Wall Street are still overpaid; companies’ problems have been shifted to the Government who now holds the debt – only true survivor of 2008.
The capitalism movement is now stronger than ever, we don’t even hear about “Occupy Wall Street”. Money is coming back into equities and investors now realize that it’s not a few bozos who will put the system at risk.
Did You Learn Something from 2008?
If Governments didn’t learn much, I think I’ve done my homework and have some notes to share:
#1 When people panic, they are probably wrong.
#2 Diversify your investments – even something as strong as a bank can collapse.
#3 Never invest in something you don’t understand (commercial paper anyone?)
#4 Invest for specific reasons, do not speculate.
What about you, have you learned anything from 2008?
I learned that DRIPS really work during troubling times.It was hard not to sell, and I didn’t, but I was really buying regularely because of my DRIP program. I do not think I would have been in a mood to buy directly during 08-09.
Invest for specific reasons was my big takeaway from 2008. In a bull market it doesn’t matter what stock you bought, or why you bought it, you’re going to make money. But in flat or down markets, having a set of investment guidelines to follow is the only way to go.
I kept investing through the downturn and came out pretty well. That’s the best way to do it if you have a lot of extra income to throw at the market. Now that I’m not working a corporate job anymore, I will have to be a bit smarter and avoid the big dips. I’m still in the process of figuring out how to do that. Meanwhile, I’m putting 5-10% trailing stops on my portfolio.
I totally agree with what is being said in this article. Also being a person who panics when things are going wrong this is very true. The economy has recovered and back to square 1. The only difference is that people are starting to be a little more careful with where they put their money and doing more research on companies that are earning a profit instead of the early 2000’s (bull market) where people invested in something that was just booming. Some of those stocks that were booming declined heavily in 2008 based of the bank crisis (bear market). So what everyone should take away from this is to be knowledgeable about whoever you invest in and make sure you are diversified in stocks, equities, futures, securities, bonds, and etc.
Jamie Scharf, Tulane University: Freeman School student
I am always laughing when watching CNBC or reading “analysis” on Yahoo or MSNBC why the stock market is falling, rallying, going nowhere. These people either have no idea or they are dumb on purpose or want to make you dumber.
Well I definitely learned my lesson. Bad I didn’t know what I know today, I could be probably done with my investment accumulation and be retired. But now I am trying to take advantage of those guys saying the world has ended.