Stock Market History: A Crash Course for Investors, Part 2

491 lượt xem
Xuất bản 20/08/2015
Part 2 of an eight-part series on the lessons to learn from stock market history explains why investors need to be realistic about the sort of returns they can expect. We've been spoiled by several decades of higher-than-average investment returns, with equities, bonds and property all performing well. Expert analysis from Charles Ellis, Weston Wellington, Karen Pine, Elroy Dimson, Janette Rutterford and David Chambers. We all know investors who've made an absolute killing. And we're often reading in the media how, if only we buy this or that asset or investment product, we could make one as well. There are even financial advisers who give the impression that investing is a one-way bet. But the first lesson to learn from market history is to be realistic. 'The history is very strong, long term. Short term treasuries return the money after inflation, but that's it. You return of the money but no return on the money. Bonds do a little bit better and stocks do better than that.' One problem is that we've lived through an era of unusually high returns. In the second half of the twentieth century, equities have performed far better than the historical average. Since 1980, bonds have had an exceptional run. And property in most parts of the world has also boomed. In short, we've been spoilt... And we've come to expect returns that are unrealistic. 'The phrase that comes back over again is this notion of overcoming confidence. There is a mountain of literature from the physiological field explaining that people - for whatever reason - exhibit this persistent behavioural characteristic.' 'When it comes to risk, we're often over optimistic as human beings, we think that we're willing to take more risk than we actually are so I think it might be a good idea to review your past behaviours and see not only the good things that have happened and the gains but remember the losses as well.' Humans are also very social animals and we like to do what others are doing. When we see people making money, we want to pile in too. And that, ultimately, is what makes markets unstable. 'What return do we expect when markets are going through a period of investor enthusiasm? Risks seem low so we don't require a very large return. And what growth rates are we expecting? We're expecting very large growth rates and that's quite fragile so the more confident people feel about the future, the more a tiny nudge in perceived risk or a tiny nudge in perceived growth rates can seriously knock the market down.' And that's exactly what happened in 1846... This is Curzon Street station in Birmingham, which opened just eight years earlier, at the start of a boom period for Britain's railway industry. Everyone wanted shares in railway companies. After all, railways were the future. 'People started seeing the prices going up and wanting to buy and ordinary individuals such as the Brontë's actually speculated in railway shares. People started making a lot of money and prices eventually fell because there wasn't enough traffic to support all these railway companies.' Of course, railways did become very popular... In just the same way, technology has become a major part of people's lives despite the bursting of the dotcom bubble. But both episodes show how easy it is for so many investors to lose their sense of perspective. 'Almost certainly it will happen again, wether it's the investment community selling stocks or wether it's media commenting on the markets and this whole idea of new era thinking will re-emerge. When that will happen, I don't know but I'll guarantee you that it will happen.' Of course, being realistic is one thing, but if all this talk about bubbles and crashes is putting you off investing altogether, that's certainly not our intention. We'll explain why in Part 3. For more videos like this, check out http://www.sensibleinvesting.tv
Trading Market investing Crash Elroy Dimson Janette Rutterford Charles Ellis Stock market history passive investing stock market crashes Weston Wellington Karen Pine David Chambers sensible investing
Mầm non Ban Mai Xanh Hà Đông
Siêu thị

Pin Laptop

Nhà hàng ngon Gò Vấp

President Palace Office for lease

Biệt Thự Nhà Phố Sài Gòn
left banner
 
You did not use the site, Click here to remain logged. Timeout: 60 second