Last February, we had the so-called Shanghai surprise, which was the Chinese stock market tumbling a large percent in only a few days, seemingly heeding the call for various China bubble predictions.  But their index quickly recovered, as with the rest of the worlds'.  The year before that was American rate hike concerns which created a similar V spike downwards but also similarly recovering at a fast rate.

Just this July, subprime concerns brought indexes 10 to 30% lower, and are now back to where they were in their July highs.  This made for a protracted V shaped recovery, much to the chagrin of "the bear has come" naysayers.

All in all, those three recent incidents come as haunting skeletons in our current bull's closet of worries.  All three events proved to be forgiving to mistakes of the dumbly hold, owe it to the wind attitude that has saved catatonic stock holders all too many times.

In 1997, the great bear struck, ending a seven year bull (actually, it was only a four year bull from 1990 to 1994, and 1994 through 1997 was just one sideways swinging event). The market kept falling straight for one year for the whole of 1997, gyrated slightly higher at Q1 of 1998, and continued to head south until December of that year. There was a short pop after that but general trend was still bearish until volume all but dried up until the return of the bull in 2003.

So where are you in all this?

Will your portfolio be saved if the great bear ala 1997 finally comes and no rate cut will rescue your savings in hindsight?  The answer is simple.  Place yourself at the bottom of the market a few weeks ago.  How was your exposure back then? Were you able to cut or desperately hoping for that magic recovery?

If your answer was that you have reduced your position to cash or to a manageable level (a level that lacked worries and extreme Bloomberg watching) during the crash, then you're okay, and you're in control. Like a saving ant, you will probably keep enough bullets for the stormy bear.

If you had the chilling answer of holding because "you knew it will come back", then think for a moment that the market controls you, and you are not in control of your finances when it comes to investing in the stock market!  You are a candidate for being one of those people whose portfolio will be sliced to only 10% of their original value when the real bear strikes.

Related Posts You May Wanna Read Too

• No Related Post