American Consequences - February 2019

to post year after year of gains, eventually rallying more than 500% from its crash levels to peak in 2000. The story repeats itself throughout history – most recently in 2008. On September 29, 2008, the Dow fell nearly 7% in one day... Investors left the market in droves. By the end of 2008, trillions of dollars were pulled from the stock market. Within a few months, a new bull market began. But those who sold at the bottom – and were too afraid to get back in – robbed themselves of an incredible opportunity to make money. Since March 2009, the Dow has risen 250%. It’s one of the longest-ever bull markets... with average market gains that could have turned an initial investment of $5,000 into $17,500. Even at my personal-finance and health- focused daily letter, Health &Wealth Bulletin , one of my research assistants was scared of the market not long ago. So I challenged her to start investing. I even bullied her a bit to get her to stop digging her heels in. She told me that the hardest part of getting started was finding where to open a brokerage account. As she told me: I approached the assignment like I would with any other: with hours of research. I went through many different trading websites, only to find myself overwhelmed with forms and instructions. For example, just trying to figure out how

But that fear is dangerous to your investments. The “safest” thing for your amygdala is to follow the crowd... To stay out of the market until you hear that everyone is buying in – normally at the top. When you hear cocktail-party chatter filled with stories of stock victories, that’s a classic sign of the end of a bull market and the start of a bear market. It works the same way with fear, too... As author and financial columnist Jason Zweig writes in his book, Your Money and Your Brain , we saw this type of fear when the market dropped 23% in a single day... the “Black October” market crash. At the time, I was working on the trading desk for Goldman Sachs. On October 19, 1987, the stock market fell more in a single day than the crash that started the Great Depression. That’s a crazy move. And when things get that crazy, clients panic... For days, we worked, ate, and slept at the office... and helped our clients move assets around. It was a true global panic. There was no time to go home, so we simply wore the same clothes from the day before. It was a nerve-racking experience, but it taught me one simple lesson: When extreme fear hits the market and things are falling apart, it creates incredible opportunities. That October, people ran for the exits, selling off as many stocks as possible. And the fear kept people wary of stocks for years afterward... even as the market went on


February 2019

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