Reflecting on 2009: Why It’s Important To Plan For A Market Crash
I’m old and remember March 2009. Over the next few years, I met dozens of people who claimed they knew the bottom was in that day or that week. None acted on their opinions in real time. Everyone was scared and there were concerns stocks could fall much further. Many people were learning about the math of losses and realizing a stock that declines 90% is one that fell 50% after dropping 80%.
The biggest problem I saw at the time, and in the first few years of the bull market, was the lack of a plan. Selling on the way down was panicky. Since investors had no plan for selling, they obviously had no plan for getting back in. Many individuals were still in cash 2 or 3 years later waiting for a pullback. When it came, some expected another decline and remained in cash.
I know some of you were in high school at that time, some probably in junior high. It seems impossible now but individual investors were convinced the world was ending.
I saw many retirement plans evaporate in the bear market and met individuals who needed to work 5 or 10 years longer than planned. Their world didn’t end but it changed dramatically.
It will happen again, so plan now and when the time comes, stick to your plan. You can plan to panic so you sell near the bottom and miss the recovery. You will have a lot of company in that plan. But I’m sure no one reading this will do that.
Expect the best, plan for the best and above all: have a plan!
Editor, Precision Profits
P.S. My plan is to use diversified strategies designed to adapt to market conditions including the one I apply in Precision Profits, where I combine the calendar with a unique momentum indicator that identifies changes in the level of greed and fear.
To learn more, click here.
After spending nearly 20 years developing pattern recognition software for the United States Air Force, I retired from my military career in 2005. My plan was to utilize the same pattern recognition principals I used in the military and apply them to the largest and most lucrative market in the world: the stock market.