Investing 
1
comments

Know Your Investing & Market History

Email  Print Print  

I was reading an article the other day (I about the importance of paying attention to your asset allocation mix, rebalancing, the usual exciting investment stuff, when I stumbled upon this passage (third paragraph):

Not to scare you, but that’s a risky situation. If one of your largest asset classes should take a sudden fall – the way emerging markets plunged nearly 60 percent between 1997 and 1998 – your returns will go into a tailspin along with it. [link]

The “not to scare you” part is in reference to advice that you shouldn’t let an asset type, in this case emerging markets, get too large without rebalancing to reduce, or at least spread out, your investment risk.

While that in and of itself is sound financial advice, the most significant idea I got out of reading that article was that I don’t know much about the history of the markets. My investing history is exceptionally weak. By investing history, I mean all the swings, bubbles, bursts, run-ups, corrections, crashes, etc. in the stock market, bond market, housing market, and other various markets and as a result, I’m doomed to follow the “sky is falling” mentality of mainstream media. My investing history is limited to the big ones like Black Monday back in 1987 and the trivia ones like the tulip bulb craze in the 17th century, but I had no idea emerging markets crashed 60% between 97-98. Did you know that the peak of the dot com boom to the trough of the burst lasted 929 days?

Do yourself a favor and check out this great resource by Fortune in which you can view the performance of the markets over the last 50 years? Spanning the top are the Presidents and Fed Chairmen and the chart reflects the performance of the markets along with periods of bear markets and recessions. It’s a superficial look but it’s a jumping off point.

If you see any periods that look especially interesting, such as the 20% drop that started in the summer of 1990 and ended in the fall, start doing research to see what caused it, how people reacted, etc. What’s especially interesting is now you can read the archives of many popular newspapers such as the New York Times, you can read the sentiment of the writers and the public by scanning the archives. Panic and irrational reactions aren’t 21st century creations, they existed back then too (much like irrational exuberance!).

{ 1 comments, please add your thoughts now! }

Related Posts


RSS Subscribe Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.

One Response to “Know Your Investing & Market History”

  1. adfecto says:

    The historical data I like to look at it the rolling 30 year data. In no (0, zip, zilch, zero) 30 year periods has the market ever returned less than inflation. That is all that matters to me. Dollar cost average right through the bad times and come out ahead.


Please Leave a Reply
Bargaineering Comment Policy


Previous Article: «
Next Article: »
Advertising Disclosure: Bargaineering may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.
About | Contact Me | Privacy Policy/Your California Privacy Rights | Terms of Use | Press
Copyright © 2014 by www.Bargaineering.com. All rights reserved.