Stockspot founder Chris Brycki made his first investment at just 10 years old. Since then, the weathered investor has lived through three major market crashes, and lived to tell the tale.
In his most recent note to investors on the platform, Brycki shared the lessons he’s learned from the 2000 tech bubble burst, the 2008 global financial crisis, and the 2020 coronavirus pandemic.
2000’s Dot-com Bubble
“The first crash I lived through was the 2000 tech bubble burst, and this was the steepest market fall I’ve ever seen,” Brycki said.
“In about a year, the NASDAQ, which is the US tech index, fell by 80 per cent. As a young trader, I’d made a lot of money trading tech shares in the lead up to this, and unfortunately I lost almost all of it in that year.”
The big lesson?
“Always lock in some of your gains,” he said. “Noone has ever lost money taking a profit.”
Brycki said traders in cryptocurrency should also heed that advice, as many tend to regret not having locked in their profits and put it into cash or a diversified portfolio.
2008 Global Financial Crisis
The GFC saw the Australian and US share markets both fall by more than 50 per cent, making this “the biggest crash” the Stockspot founder ever lived through.
The grim lesson Brycki learnt from the 2008 GFC was: “Markets can always fall much further than you expect.”
More than that, it’s to also have a strategy in place to withstand these major falls, and to make sure you’re not leveraged when you invest - that is, make sure you don’t borrow money to invest.
“Any money that you’re borrowing to invest can be lost very quickly, and it can entirely wipe out your portfolio in a market crash.”
2020 Covid-19 Pandemic
If the GFC was the biggest crash Brycki had ever seen, the coronavirus crash was the fastest.
“It was about equivalent to the famous 1987 crash - in two months, the market fell by 35 per cent in Australia, and in other markets even more.”
But the reason the market crashed - and crashed quickly - was because it was completely unpredictable.
“If everyone's predicting something, it tends to already be built into the price and probably isn't something you need to worry about,” he said.
The lesson? “Always be worried about the things that nobody's thinking about.”
The best thing you can do to prepare for unpredictable events is to make sure you have a portfolio that can withstand a crash, and have some money set aside that’s ready to invest if it does so you can actually take advantage of it.
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