If investors predicted the crash, they could have sold their stocks sooner to prevent losses. People lost a large portion of their investments with the recent crash. Accompanied by the crash is the one of the most notable fraud in history, the Bernard Madoff Ponzi scheme. Investors lost billions because of Bernard Madoff and one manager even committed suicide. There were many lessons to be learned from the previous crash.
One thing that investors can learn is to predict future economic condition in advance and then invest or sell accordingly. It wasn’t hard to predict the previous crash knowing that the country was on the downside for awhile. If investors learned quick they could have sold their stocks and avoid losses. Prediction is an important concept in investing because if you invest in a company you have to forecast the future of that company. It’s risky to invest thousands without forecasting the future of the company. Forecasting is something that all investors should do and it’s a great skill to help avoid losses. Forecasting works really well if it’s used with financial statements of the companies. The country was doing poorly due to other distraction like the war in Iraq. The war took a lot of funding and management away from the economy. This had an impact on the economy in whole. The stock market will act in accordance with the country’s economic status and if the country is doing poorly then it’ll affect the stock market.
Investors should make a note of the previous crash and see if that will apply for the years to follow. The stock market did well in 2007 and from that success investors were over-confidence and bought more stocks by assuming that it would do well. It didn’t do well and the stock market fall at least 50%. One thing that investors can learn is to not be over-confidence from past success because the stock market fluctuates from time to time. It’s not stable due to surprising events like the war. There’re many factors that cause the stock market to fluctuate from years to years and you should expect that to happen and invest accordingly. You can learn to sell stock early so that you don’t lose and learn to predict the market early. It takes a long time for a person to be a good investor and you should learn as much as you can to make yourself a good investor. It doesn’t happen over night. You need knowledge and skills. There’s nothing that is more valuable then learning from past events and investors. You should learn from their mistakes as well as their successes.