The Year was 1999. There was a Gold Rush going on. Buyers were snapping up Technology Stocks at outrageous prices. It made no difference if these New Companies had No Earnings…No Problem. This Time it was Different!
That year a friend quit his job at Dell to become a Day Trader. I also fantasized about retiring early from my TV News career. Who needed to punch a time clock anymore? The “Smart Money” was chasing fabulous returns by investing in any website with DotCom in its name. Why invest in Boring Bonds, Crappy CD’s, or Stale Real Estate?
Unfortunately, Good Times only teach us Bad Lessons. You know what happened in 2000 when the Tech Balloon Burst and those High Flying “Can’t Miss Companies” like pets.com and eToys.com crashed to Earth.
8 Years later the Great Recession humbled millions more, stealing more than $19-Trillion Dollars of Household Wealth. What did these Economic Calamities teach us?
1. There is a direct correlation between Risk and Reward. However, Riskier Investments cannot be counted on to deliver higher returns…If Riskier Investments reliably produced higher returns, they wouldn’t be riskier.
2. Markets are unpredictable, but, Costs are forever.
3. Diversification is the only “Free Lunch” in Investing. It protects your Portfolio over the Long Term.
4. Bear Markets are the friend of the Young…allowing them to buy “Stocks on Sale” If they have the Courage.
5. Economic Cycles still exist. Astute Investors profit from them.
6. Most of us Overestimate our Risk Tolerance. After all, It is one thing to train for a Crash Landing in a Flight Simulator. The Real Thing is something else entirely…
7. Your best chance of securing your Financial Future is to live a “Thrifty Lifestyle.” Invest in People and Experiences. Enjoy the Journey.
So, what do you think? What are your Favorite and Least Favorite Financial Memories? What did those experiences teach you? Can you add any Eternal Truths?