Interesting piece of news in my Facebook page. Not from any friend but it’s a ‘suggested video.’ “The next stock market crash will strike in 2018.” I think the statement is quite worrying for some, perhaps. This is especially those who are not so used to many predictions every now and then. Some of which may come true. Just as those economists who somehow gave early warnings about the 2008 mortgage crisis, all these predictions may come true because they are usually backed by some analysis of available data. What goes up, must come down. In fact there are arguments whether or not the Dow Jones is on the brink of collapse or still has a long way to go. This one supports the former. ‘Let this be the final warning on US stocks’ overvaluation.’ So, yes everything within the article points towards a collapse. In other words, better sell and wait to buy when it plunges. This one meanwhile supports the latter. Why The Dow Jones Industrial Average Is Not Overvalued At 22,000 It gave many strong reasons to tell you why it is not overvalued. In other words, can continue buying. Okay, most of us may not own any shares in Dow Jones. However, as all of us are aware, if Dow Jones are down, most of all the other bourses around the world would wobble and perhaps crumble too.
As someone who has gained slightly more than I have lost in the stock market, perhaps I offer my personal views about any stock market crash. I will share just 4 things.
1) Stocks are real companies with real businesses. Do you know what are we buying? If we do not really know what is the business that the companies we bought shares in are in, it’s best not to hold them too long, just in case that drop really do happen. If however we know the business that the company is doing and we could see evidence that it will continue to do well, even during a slowdown, it’s fine to hold on and not to panic.
2) What goes up must come down. Are we overstretched? As long as we do not suddenly need lots of money invested in shares, riding out a downturn is always possible. In fact when we look at unit trusts, the fund managers are usually taking a much longer term view and do not sway here and there every day. If they do, we should be wary of the consequences. No one wins all the time from gambling. Not even Central banks anywhere in the world.
3) Positive predictions are worth worrying about. Negative predictions are really just opportunities if we are ready. You know when every piece of news we read are positive and every uncle and aunty are going into the stock market, it’s worth noting that at that time, the stocks are usually overvalued. Sentiment is just too bullish! In terms of a sudden drop, it presents opportunities to pick up good stocks which had just become undervalued. The window of opportunity is however a short one when we are talking about good companies. Very soon, some clever fund managers would start buying and the prices go back to normal numbers.
4) Do we follow and read all the predictions? When we read and we know what are all these people are saying, it gives us a better sense of direction of how to manoeuvre the market. If however we read only one side, regardless of the side we believe in, we are surely going to be surprised one of these days. Many times, some arguments just do not make sense. The question should always be which one has more valid contentions and not so much of who can talk better. The one who can speak very well may not be a better President. The person just proved that he could get moe votes………
Happy believing yeah. Cheers.
written on 1 Sep 2017
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