Mar 092020
 



The market is down about 16% due to fears over oil prices and the novel coronavirus. For many of us that’s thousands of dollars vanished. Maybe tens of thousands. Might as well end it right?

Side note – the epidemic of suicides after the 1929 crash is a myth.

First things first. You didn’t sell did you? DID YOU? I sure hope not. If you did you’d better rebuy everything you sold, praying the price hasn’t moved. Here’s what everyone FOOLISHLY thinks:

Oh I’ll just sell my investments now and re-buy them when the market bottoms out

WRONG

How do you know the market isn’t going to rebound the day that you sell? How do you know where the bottom is? YOU DON’T. No one does. Some people will claim they know a bottom, but predicting it accurately is like predicting a spin of the roulette wheel.

Let’s look at a few scenarios. I’ll show you some market data, and you try to determine if now’s a good time to sell everything while you wait for the market to bottom out. I removed the dates and of course you don’t know what’s going on in the world. But let’s try to make some predictions based on the chart. The second image in each scenario will have a red line where the first chart ended.

SCENARIO 1

Hmm, the market's not been good the past year, looks like it's on its way down now. What do you do? BUY/SELL/HOLD

Hmm, the market’s not been good the past year. It took a dump last August. Is it going to take another this August? It’s down about 9% from its high in April. What do you do? BUY/SELL/HOLD

 

SCROLL DOWN FOR RESULT

 

 

 

 

 

 

 

 

 

 

RESULT

The market rebounded 13%. HOLD/BUY

 


SCENARIO 2

The market has been going steadily up except for that bump in March and the current bump. What do you do? BUY/SELL/HOLD

The market has been going steadily up except for that bump in March and the current bump. What do you do? BUY/SELL/HOLD

 

 

 

 

 

 

 

 

 

 

 

3 after_line

The market was super volatile over the next six months. You’re slightly down but probably benefited from dividends. HOLD

 


SCENARIO 3

bottom before

This market has been tanking for the past year. Is it the bottom yet? or are more losses on the way? BUY/SELL/HOLD

 

 

 

 

 

 

 

 

 

bottom after_line

Looks like the bear market is over! Anytime in the past 6 months would be a great time to buy. HOLD/BUY

 


SCENARIO 4

The market had a good run the past year but took a steep dive this October. BUY/SELL/HOLD

The market had a good run the past year but took a steep dive this October. BUY/SELL/HOLD

 

 

 

 

 

 

 

 

 

 

1after_LINE

Well the market completely rebounded. Hopefully you didn’t sell! HOLD

 

FINAL THOUGHTS

I hope this quiz taught you that predicting trends is essentially a coin toss. Volatility in the market makes conditions essentially gambling. In nearly all cases it’s best to hold or buy while stocks are discounted.

If you really want to try your hand at stock picking you should set aside a small amount of your total and accept that it’s gambling. If you’re like me, you’ll promptly lose most of it.

Just don’t listen to your panicky coworker who’s telling you to abandon ship on your long term investments:

Sell at the bottom

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  One Response to “THE MARKET IS CRASHING”

  1. As said in the original Jurassic Park…”hold on to your butts”.
    No telling where this is going.

     

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