Stock Market Crash

Was it really just a year ago when the sky fell in??? ….. so to speak anyway.

The bulls have well and truly stamped their ground since July this year – we’ve seen investors here and in the U.S respond well to the latest reporting season and improving economic news. The US alone has recouped a stunning $5 trillion of paper value on the stock market since early March!

And on Friday afternoon, despite it being Quadruple Witching Hour where all stock-index options, index futures, individual stock options and individual stock futures in the U.S expire at the same time, fuelling investor nerves and market volatility, the Dow Jones closed at a new high for 2009.

So if you have been sitting on the sidelines waiting for the right moment to invest in shares, there’s never been a more exciting time in the market than right now. Well actually…there has!

Consider this; the 5 years that followed several historical market crashes returned:

  1. 367% after the 1932 stock market crash
  2. 251% after the 1982 stock market crash
  3. 267% after the stock market crash that ended in 1994
  4. 237% after the tech bubble and the 911 stock market crash

And although our market here in Australia has risen quite rapidly over the last 6 months, we have still only recovered 45% and history tells us that what has happened in the past is more than likely to happen again in the future.

Now I’m sure the average person would be more than happy with a further 100 – 200 return over the next 5 years, but if there’s one important lesson we should have learnt over the last 12 months, it is that of applying effective risk management.

Take the necessary steps to insure your shares, just as you would your house or car.

When you invest in the market over the longer term, you are going to witness the normal cycle (up and down) driven by people and emotions – fear and greed. In a healthy up trend, prices will rise, pause and perhaps drop a little (correction) before rising once more.

We are riding the greed part of the cycle right now with many stocks rising into overbought territory before possibly heading for a healthy correction, so the smart move to make when investing in shares would be to use some insurance so your funds are 100% protected.

Imagine putting as little as $ 3,000 into the market now and returning just a conservative 50% on that overthe next few years?

What if the market were to rise more than 50% as it has done after previous market crashes?

Better still…..imagine if you knew how to rent those shares out to make a regular income while you are waiting for them to go up in value?

Would the bank offer you that sort of return?

Ever wondered how the rich get richer?