Crash is Coming

See, there are still some shiny chunks

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​I waited to start investing for several years. Granted, I was flat broke the majority of the time before I started buying into the stock market. I was technically still flat broke afterward too! I lived in half a dorm room! What I mean is that I was reading and learning about investing, I knew I could save 20% of my income if I tried hard, and I felt like I “should” put money into the market. I even had a few picks I would have bought. There were two things holding me back. One, I didn’t really feel like I knew how to set up a brokerage account, and two, I was afraid the market would crash and I’d lose all my money.

Now I KNOW the market will crash and I can lose all my money.

I shouldn’t have worried about my first concern. If there’s one thing you can easily do, it is to call any finance firm and get them to put your money somewhere. If you have cash in your hand, you’ll find that their customer service is excellent. They will help you to the point that they might physically send someone over to hold your hand if you asked.

That all changes when the money disappears. The same account reps who are so lovely when it’s time to make deposits are too busy (and sad) when the Dow plummets. It’s temporary, though.

On average, the stock market loses money one year out of every four. It’s stochastic, though, meaning that it has no patterns. What was true in the past may not be true in the future. Nobody can tell. As an historian, I just look back at the time period between now and 1792, when the New York Stock Exchange was founded, and note that it has always gone through fluctuations. That’s enough for me. I assume that periodically, my portfolio will decline drastically in value, and it will take a few years to catch up afterward. (If ever. Come the zombie apocalypse, obviously all bets are off, but at that point all my retirement worries would technically be solved).

It’s not like I’m foretelling the future when I say that the market is going to crash. I would be if I said I think it’s coming in first quarter of 2018. That would be a prediction. Making specific predictions is always a terrible idea because they’re virtually always wrong. Most people like to wait until after the fact to claim that they saw something coming. Putting it in print sets you up for failure.

In reality, I am planning for such an event.

What’s the worst case scenario? The worst case scenario is that I wait to buy stocks, thinking the price will fall, and instead it goes up. When that happens, it means I paid more than I needed to for something and that I then missed out on the gains I could have claimed. It’s annoying, but I can live with it.

If I’m right, the upside is that I can buy the same stocks on my wishlist at a lower price.

Knowing what I know now, after roughly fifteen years in the market, I feel really sad and foolish for waiting so long to dip my toe in. Remember how I said that I had stocks in mind that I would have bought? The first time I ever thought “this company would be a good investment,” it was when the iMac came out. I saw those five bright colors and I just had this strong feeling that Apple was coming back and would be a stronger brand in the future.

My husband helped me do the research and math on that one. If I’d put in what I could have afforded at the time (ten shares), it would have been worth about $14,000 now. Really nice! Really nice but not make-or-break for my eventual retirement. I try not to think of it the way so many people do about the comics or baseball cards that their moms threw out. It’s not like I was an unrecognized genius or like I would have made a billion dollars.

It is interesting to think, though, that if I’d bought an iMac, it would be an obsolete collector’s item today. The same money put into Apple shares would still be worth something.

Take that thought and transfer it to the concept of buying Starbucks stock instead of buying Starbucks coffee. (Although if everyone did that, the company would either have to sell something else or it would cease to be).

The thing is, anyone who lives an average American lifestyle has a fair idea of how consumer brands are faring from year to year. If you commute, shop, watch TV, use a computer, and talk to other Americans, you’re exposed to a lot of products and services. You know a certain amount about what they do. You know your own preferences, the brands you trust, the trends that excite you versus the trends you think are dumb and annoying. You can trust that trend awareness. It’s not nothing.

That’s basically how I started picking stocks, as opposed to funds (which are groups of a bunch of different stocks). I read a bunch of investment books at the public library. I came away with the idea that if I understood what a company does, I could make as good a guess as anyone else whether they’d be worth more in the future. My strategic question is: “Do I think this company will still exist in ten years?” If so, I try to imagine whether I think they’ll still be awesome or whether they’ll be a little cobwebby.

I’m starting to think it’s about time to reevaluate this strategy, because I think newer companies will be more likely to start fast, make a lot of money in a few years, and then become irrelevant shortly afterward. There will still be companies in that sector, but they’ll come and go. It’ll be harder to make a long-term investment strategy, just like old 1980s investment books always said to buy Coca-Cola, Sears, McDonald’s, and Levi’s. Then the 21st century happened.

The world is changing fast. There aren’t really that many rules. Humans have been investing in some form of stock market since medieval times, though, and I think it’s reasonable to assume we’ll keep doing it. Whatever rich people like to do, especially if it involves money, will probably sustain itself.

When I got into the market, I had a quarter-time job. I bought my clothes at the thrift store. I didn’t own a car and in fact didn’t know how to drive yet. There were still times when I wasn’t exactly sure where my next meal was coming from. The only thing that got me to put that money aside was that I KNEW it would be harder for me to get a job and earn money as an elderly, frail little old lady. Old Me deserved for me to save something for her. I believed that the economy would continue to expand and be worth more at some distant future point than it was in 2002.

I haven’t actually lost any money in the stock market. After the crash of 2008, I made .25% interest. Despite that, I’m smart enough to know that anything can happen. My portfolio could basically vanish. That would be quite a lesson! Even if that happened, though, I’d still plan to put in new money and buy shares of something. I’m pessimistic about the next couple of years of market returns. Ultimately, though, my faith in the market leads me to look at it as an opportunity to buy stocks of strong companies on sale. I’ll almost be too excited to be mad.

My basic advice is that if you feel too broke to invest, you should work to learn more about how money works. Read up on it. There’s no risk in reading a book, right? Then get out a calculator and figure out what one percent of your income is, and save it. If you’re already saving a little, save one percent more. If you feel as brave as I think you are deep inside, wait until the day you read in the news that the market has dropped by 20% or 30%, and then buy yourself some stocks.

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