Today, October 29th is the anniversary of the First Major Crash of the Stock Market, which was a large contributing factor to the great depression of the 30’s, and that begs the question, when is the next Big Stock Market Crash, and how can I prepare for it?
How bad was the crash of 1929? The following useful 10 year graph might help:
Amazing stuff eh? I looked at this and was astounded what I didn’t know about this period.
- There was a short recovery in January 1930, and then everything went down from there
- It took a long time to get back to 1929 levels
- There was still a great deal of market volume along the way too
What can this teach us about today’s market? Not much.
The Economic situation back then has about as much to do with today, as it did with the great Tulip Bubble Burst, the world is a very different place. Don’t get me wrong, this kind of catastrophic drop will happen, just that comparing 1929 to now is foolish, so many things are different, not much can be learned from 1929 (other than, this can and will happen again). If you’d like PBS supplies this Useful Timeline Leading up to the Crash, if you think you can find any parallels there.
Is this another “fire and brimstone” rant about losing money, and such? No, in fact, if you are an Index’er or Couch Potato I would give the same advice as I gave many months ago (and stole that advice from our friend Preet), Live With It and Don’t Look. You will most likely have to re-balance in a while, but do that when you normally would and go back to your regular life, is the only advice I could give. Let the Hedge Fund Managers, Active Mutual Funds and Day Traders deal with it all, not much that can be done, and panic’ing isn’t going to change things.
If you “timed” the market right, good for you, it is most likely through blind luck, but good on you, if you dodge the “big one”, but it was luck (unless you are part of the inner sanctum of traders who knew it was coming, in which case you are most likely guilty of Insider Trading).