Introduction
Ever since I first entered the investment industry circa 1970, I have been confronted with a constant and persistent admonition about the next pending market crash. In those early days I contributed much of the negativity toward stocks to a lingering overhang from the Great Depression. Many of the people I was talking with had been literally traumatized by stern warnings from their parents or grandparents about the risk of investing in the stock market. They were told that stocks were too risky for prudent people to invest in and serious money should never be invested there.
Fast forward to today, and once again I am receiving many questions from investors regarding what they should do to protect their portfolios (their money) from the pending and some even say imminent market crash. Many investors, especially those in retirement, are asking if they should go to cash with either a portion or all their money. This is usually followed with a statement suggesting that they no longer have the time to wait several years to get their money back.
With that said, logical thinking investors certainly have some rational justification to worry about the possibility of a looming market crash. After all, we are now in what is surely the late stages of one of the longest running bull markets in history. Therefore, common sense and history tell us that all bull markets end with a bear market - and vice versa. As a result, it can only be a matter of time before this bull market comes to an end. Consequently, many investors feel the need to take action to protect themselves. However, I personally agree with legendary investor Warren Buffett when he said: "inactivity strikes us as intelligent behavior."
Not All Stock Price Drops Are the Same
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