How to Manage Your Investments Late in a Cycle
Nobody knows for sure whether equities will keep rising or for how long, but knowing a little market history can help ease the anxiety.
Many see bubbles forming in financial markets.
Photographer: Pascal Pavani/AFP via Getty Images
Live long enough to see several complete market cycles, and patterns emerge. Denial and disbelief turn into reluctance and acceptance as stocks go from being far too cheap to far beyond fair value. Those who lashed themselves to the mast to avoid the siren call of the bulls miss a money-making opportunity as a speculative frenzy intensifies. When the crash belatedly arrives and blood flows in the streets, most are too terrified to buy. Instead, they double down on their bearish bets, missing a generational buying opportunity.
This rinse, lather, repeat cycle of market history is filled with epic stock narratives. A couple of the more recognizable ones in recent history include the dot-com boom of the late 1990s, real estate in the 2000s and the blockchain frenzy of 2010s. But what really makes them so fascinating is the underlying human psychology.