Crash Course

The anatomy of a market crash is always the same. At first, we convince ourselves that the falling prices are merely part of normal market volatility. As things get worse, we rationalize that the other market participants are fools for selling into the red. With losses mounting, panic sets in and some of us will sell all we have, whilst others take the pain and persevere, but none come out unscathed. The scars of living through a market collapse stay with us forever. 

So, what lessons must we bear in mind as the S&P 500 has lost 10% in two days, and things are seemingly so bad that Fox News took the ticker off its screen for the first time in its 28-year history? For one thing, trying to time the bottom is a mug’s game. There is simply no logic to a stampede, and the markets will turn when the last bull has given up. 

It’s also not a good idea to sell, as the problem with getting out is that we don’t know when to get back in, and the only thing worse than trying to time the markets is doing it twice. On the contrary, we should nibble if we can, and some of the greatest money-making opportunities in history have come from buying when everyone else is selling. Most important to remember is that in time, markets always come back, so might as well play some golf while the rest of the world melts down.