If We Knew Then What We Know Now

The market moves in cycles and we should learn to learn from our mistakes. However, we don’t always remember life’s past events.  Do you remember where you were when they revealed the identity of “deep throat”? Or when Bill Clinton was impeached? What were you doing when Princess Diana or Michael Jackson died? Where were you when the first plane hit the tower on Sept 11?

It’s funny the things that we choose to remember and choose not to remember. History always repeats itself; this is also true for the market. The market moves in cycles. We cannot forget what has happened in the past otherwise we will not learn from our investment mistakes in the future.

As a young child I remember sitting in the lobby of my parent’s bank with my younger sister Tara. We were playing with kids toys and waiting for my parents and our great grandmother to come out of the bank office.  I didn’t understand why my great grandmother drove 2 hours just to come to the bank.  Well, I learned later on as I grew up that it was 1987 and interest rates were incredibly high in the 80’s.

I didn’t know it then but I have learned about it now.  My great grandmother lent money to my parents at a lower interest rate so they could pay off their high interest mortgage.  I believe that this is the reason why many people who had a house and lived through the 80s now always panic at the slightest increase of interest rates. It is ok to be cautious but there is a fine line between being prepared and being paranoid.

Over the years we have seen many crashes in various sectors throughout the market. In the early 2000’s we saw the technology sector crash including a drop in the stock of market leaders such as Nortel and Enron.  Other trends in the past that have proven to be very risky for investors have included investing in Asian markets and the Precious Metals sector.

The  current buzz in the financial industry is investing trends such as Emerging Markets and Social Responsible Mutual Funds.  Don’t bother researching and reading on these new trends, as they are just that, trends.  Please do not fall victim to the current investment trends.  If we have learned anything from the past market cycles it is that trends are not long term investment strategies. They are a fad and with time they will pass…along with your profits.

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(photo by moriza)