17. How to Buy During a Crisis Flashcards
(23 cards)
What should you do during a market crisis?
Stay calm and find a way to think about the crisis rationally.
What did the flower seller represent during the crisis?
A moment of normalcy and hope amid chaos.
Who is attributed with the saying, ‘The time to buy is when there’s blood in the streets’?
Baron Rothschild.
Why is it unwise to hold cash during a market correction?
The infrequency of these events makes hoarding cash unprofitable for most investors.
What is the potential upside of investing during a market crash?
Every dollar invested during the crash can grow significantly more than one invested before the crash.
How much would $100 invested at the lows in summer 1932 have grown by November 1936?
$440.
What percentage gain is required to recover from a 10% loss?
11.11% gain.
What was the S&P 500 down by on March 22, 2020?
33%.
What is the expected annual return if recovery takes 2 years after a 33% market loss?
22%.
What does the analysis imply about buying when stocks are down by 30% or more?
There is a less than 10% chance of experiencing 0%–5% annualized returns.
What is the typical future annualized return when markets are down by 50%?
Usually exceeds 25%.
What is a notable example of a market that did not recover quickly?
The Japanese stock market since December 1989.
What is the estimated probability of losing money in an equity market over a 30-year horizon?
12%.
What is the likelihood of an equity market growing its purchasing power over the long run?
There is a 7 in 8 chance.
How does periodic investing affect the probability of losing money over decades?
It reduces the probability of loss compared to a single large investment.
What is the key takeaway from the example of the Japanese stock market?
Investing over time mitigates the risk of long-term losses.
What should investors avoid doing during a market crisis?
Sitting in cash until the market stabilizes.
What quote by Friedrich Nietzsche relates to investing?
“Ignore the past and you will lose an eye. Live in the past and you will lose both.”
What did Jeremy Siegel summarize about fear in investing?
“Fear has a greater grasp on human action than does the impressive weight of historical evidence.”
Who summarized the impact of fear on human action in investing?
Jeremy Siegel
Jeremy Siegel is a renowned financial author known for his insights on investing.
What does Jeremy Siegel believe has a greater influence on human action than historical evidence?
Fear
This highlights the psychological aspect of investing, emphasizing how emotions can affect decision-making.
What is the advice given for investing during difficult times?
Keep buying the next time there’s blood in the streets
This phrase suggests that investors should take advantage of market downturns.
What key question is posed after discussing how to buy assets?
When should you sell?
This indicates a shift in focus from buying strategies to selling strategies.
