Pandemic or Not. You Can’t Predict Bubbles, So Stop Trying

Burst bubble with a pin

If you believe the Chicken Littles running around, then Silicon Valley has been sitting on top of another huge tech bubble for the past couple of years. Surely it must pop soon. Likewise, Tesla’s stock is often the most shorted in the market, yet share prices for the electric car company continue to climb. Despite numerous claims that the bull stock market has run its course, it continues to go up and up.

Will we hit a tech bust? Will Tesla shares and stocks, in general, come spiraling down? Or, will a pandemic rage and tank the global market? It’s certainly possible, but these examples showcase the fact that even the experts can’t predict the financial future. That means we – normal humans that we are – can’t either.

Trust Good Money Habits, Not Your Gut

It’s easy to find stories of that one person who picked the right stock just before it shot up and made him a millionaire, or the woman who wisely pulled out of the market just before a big dip. Some people get lucky. What you don’t hear are the stories of people who pulled their entire retirement out of stocks during the doldrums of the 2008 Recession only to miss out on the huge, double-digit recovery in the following years.

The truth is, a few people get lucky, but most of us guess wrong when we try to predict the stock market or the next big bubble. We have a natural propensity to want to buy when prices are going up and to sell when prices are going down, which is, of course, the exact opposite of the famous adage, “buy low, sell high.”

Here at WIFE, we’d like to offer different advice. Since we can’t know when high is high and low is truly low, we say, “Invest wisely for the long term.”

Invest Wisely

What does it mean to invest wisely? We hate to disappoint you, but the truth is very boring. Investing wisely means:

  • Build a rainy day or emergency fund before you start investing. Ideally, this fund should cover six months of your expenses.
  • Buy a home when you are financially ready to buy a home… not based on the market.
  • Invest in a diversified portfolio that balances risk based on your tolerance.
  • Invest in your retirement as early as possible and shift to lower risk vehicles as you get closer to retirement age.
  • Historically, the stock market has always rebounded, so never try to time the market.
  • Don’t try to pick individual stocks unless you are willing to lose your money.
  • Ignore fancy investment tricks, like shorting stocks, unless you are willing to lose big.
  • Develop no-thought saving habits, such as automatically deducting a portion of every paycheck and putting it into your retirement account.

Boring, right? But sometimes boring can be good, especially when it comes to your money! If you are looking to get your money game on track this year, consider starting a Money Club with a few good friends are neighbors. It’s fun, easy, and free.

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2 thoughts on “Pandemic or Not. You Can’t Predict Bubbles, So Stop Trying”

  1. Paz L Jimenez

    I am 60 years old, just the last year divorced. Do you think that I can start to invest in the stock market?

    1. Yes, once you have amassed an emergency fund that is sufficient for your needs, you should start to invest as soon as you can, with money you won’t need for several years into the future. Invest through retirement accounts, 401(k) or IRA, in a balanced portfolio of stocks and bonds. You’ll probably find mutual fund investing most convenient, since the fund manager will be picking the specific investments.

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