Stock Market History: A Crash Course for Investors, Part 3

Uploaded by Day Trading Tips on April 16, 2015 at 9:28 am

Stock Market History: A Crash Course for Investors, Part 3

http://www.sensibleinvesting.tv

Part 3 of an eight-part series on the lessons to learn from stock market history explains why investors need to stay calm when, inevitably, markets turn volatile.

Presented by Robin Powell. Expert analysis from William Sharpe, Richard Wood, David Chambers, Elroy Dimson, Janette Rutterford and Weston Wellington.

If Parts 1 and 2 of this video series, with their focus on bubbles and crashes, have put you off investing, then Part 3 is designed to redress the balance.

That's because the next key lesson to learn from market history is to stay calm.

All investing involves a degree of risk. And market volatility is inevitable. It goes with the territory.

But more than that, there's a direct link between risk and expected return.

And that's not a theory, but a mathematical fact, as confirmed in the Capital Asset Pricing Model, which earned its authors the Nobel Prize in Economics.

The problem is, of course, that in those bad times, investors are often emotional. When prices fall sharply and further falls are predicted, we tend to panic, to reduce our exposure or bail out altogether.

But history shows that's just the wrong thing to do, because almost invariably prices eventually recover.

It's because it was the most recent crash that 2008 is the one we tend to focus on today.

But all through market history there've been events which seemed catastrophic at the time, but in hindsight appear a blip.

Take the famous bubble of 1720, for example, when the South Sea Company collapsed like a house of cards.

In fact not only do markets recover. They often do so far more quickly than expected.

Now, you might be thinking, OK, I get it. You should ride out any volatility because markets always recover.

But, wouldn't it be great if you could get into the market at the start of a bull run - in 1990, for example - and out again just before the bear market that began in 2000.

Well, hold that thought... and join us again for Part 4.

For more videos like this one, visit http://www.sensibleinvesting.tv

http://www.sensibleinvesting.tv

Part 3 of an eight-part series on the lessons to learn from stock market history explains why investors need to stay calm when, inevitably, markets turn volatile.

Presented by Robin Powell. Expert analysis from William Sharpe, Richard Wood, David Chambers, Elroy Dimson, Janette Rutterford and Weston Wellington.

If Parts 1 and 2 of this video series, with their focus on bubbles and crashes, have put you off investing, then Part 3 is designed to redress the balance.

That’s because the next key lesson to learn from market history is to stay calm.

All investing involves a degree of risk. And market volatility is inevitable. It goes with the territory.

But more than that, there’s a direct link between risk and expected return.

And that’s not a theory, but a mathematical fact, as confirmed in the Capital Asset Pricing Model, which earned its authors the Nobel Prize in Economics.

But history shows that’s just the wrong thing to do, because almost invariably prices eventually recover.

It’s because it was the most recent crash that 2008 is the one we tend to focus on today.

But all through market history there’ve been events which seemed catastrophic at the time, but in hindsight appear a blip.

Take the famous bubble of 1720, for example, when the South Sea Company collapsed like a house of cards.

In fact not only do markets recover. They often do so far more quickly than expected.

Now, you might be thinking, OK, I get it. You should ride out any volatility because markets always recover.

But, wouldn’t it be great if you could get into the market at the start of a bull run – in 1990, for example – and out again just before the bear market that began in 2000.

Well, hold that thought… and join us again for Part 4.

For more videos like this one, visit http://www.sensibleinvesting.tv