Learning from the past mistakes of man can really help us to do things better the next time around. Sometimes looking at the tragedies of the past can help us today.
One of the worst economic disasters to look at was the 1929 stock crash. This started a great depression which lasted for 12 years. Those who entered the market when it was at it’s highest would have experienced a large loss and would have had to wait several decades to break even.
So, What is the real story behind the great depression? This is a common story that appears over and over again. People let their greed get the better of them and bought with both hands, forcing the market to go higher and higher to keep up with demand. Businessesjust could not keep up with the unrealistic growth expectations.
The market had to come crashing back down to reality eventually.
When it did, people panicked and sold their stock out of fear. The government refused to acknowledge how bad of shape the economy was in and decided to let it work itself out. This eventually lead to a huge desaster which lasted 12 years.
What can we take away from this? There are a few lessons here. The first thing is that if the government does nothing during economic disasters then we can get hurt even worse. In fact one of the 1929 great depression facts was that the government’s failure to step in and save the economy only made it worse. To prevent something like this from happening again the government has to help prevent otherwise strong businesses to fail during economically hard times.
It also shows that buy and hold may work well while everything is going up, but may not always be the best strategy. Long term investors lost their shirts while some traders made it big. Sometimes you have to be more open minded to the bearish side of the market.
The great depression was a terrible time in the US. But we can take lessons away from it to make tomarrow a better day.