Three Important Lessons When Markets Freak Out
We can learn lessons from investing history
I sometimes feel like Doctor Doom. Calls from media to comment on what’s happening in the stock market shoot up when bad things happen. Case in point: I was contacted on August 5, 2024, when the Dow Jones Industrial Average shed over 1,000 points, a one-day decline of 2.6 percent, while the tech-heavy Nasdaq dropped by 3.4 percent. It seems like we don’t need or want to understand when good things are happening — like Prince, let’s just party like it’s 1999! But we have a tendency to freak out when bad things are actually happening.
What causes stock markets to gyrate? And as investors, what should we do? I’ll use August 5, 2024 as an example, but my comments can be generalized beyond that date, to any market freak-out. We can learn much from investing history. As such, I’ll highlight three important lessons for investors when this happens, from my new book (out on September 24, 2024), Trailblazers, Heroes, and Crooks: Stories to Make You a Smarter Investor.
Assessing stock market risk
Let’s take a look at what was happening in the stock market in 2024. The widely followed S&P 500 index started the year at a level of 4,745. It hit a high on July 16 of 5,667, up 19.4 percent for the year-to-date. On August 5, the index closed much lower, at…
