DOWJones Index (Jan 2018)

The business cycle often works in 7-10 year patterns.  In there was a crash in 2001 (after the dot-com bubble) and 2008 (after the sub-prime lending bubble).  We’re nearly 10 years into our current business cycle and we are due for another crash.  When?  I’m not sure.  I’m not a mind reader.  2019, or sometime this year in 2018 are possibilities. 

The stock market is at an all-time high right now just as it was in 1999 and 2006; the market cap is now well over 20 trillion dollars.  Aside from a small lull here and there, the stock market has been showing constant growth without any major corrections, which is very suspicious. 

It’s not only my opinion.  Other credible sources express similar concerns.

For those in the stock market, from hereon out: exercise caution

1) Take some profits.
2) Don’t buy at an all-time high.
3) Put in only what you can afford to lose.
4) Diversify into other types of investments
5) Monitor the DOW Jones/NASDAQ/SP500 frequently
6) Avoid high-risk stocks.
7) If the crash starts to happen, don’t be stubborn.

Perhaps there will be another surge this year before the crash (by the late-adopters who want to follow the hype in “fear of missing out”).  Stocks will probably keep rising for a while longer. However, the longer you riding this wave, the greater the probability of facing the crash.

The mantra is “buy low; sell high”.  In 2007, I remember, many people entrusted their money into financial advisors (who were getting a cut of their profits and telling them that everything would be okay).  They said, “don’t sell high; sell at the top”.  Except, at the top, you’ll need a parachute and those financial advisors who are getting a cut of your profits won’t be giving you their fee back if you lose that money.

Myself, I’m waiting for the crash to happen so I can pick up some cheap stocks.  For example, during the 2008 recession, people thought the auto industry was dead.  The price of Ford Motors shares plunged to $2 by early 2009 and then recovered to $11 in early 2010.  Those who were smart enough to sell at a high and buy at a low were able to make 5x profit.

I am not writing this article to inspire panic.  However, for the stock market, it’s time to avoid the hype mindset and shift toward the cautious mindset.

This is an editorial and should not be taken as professional or expert financial advice.