Note 11: The myth that Subprime Mortgage Crisis has created

2008 was a memorable year for many investors. It was the start of the Great Recession and the day when the word “ Subprime Mortgage Crisis” entered into our jargon.

I have read before that our character and belief is very much formed by major events in our personal life. Our shared identity among friends are also formed by common events. Combined, I believe this created a form of echo chamber for better or worse for many investors. In my opinion, the 2008 financial crisis created create and solidifies a group of investor or traders who believe that the next crisis is always around the corner lurking and they can take advantage of it, just like how some people struck it rich post 2008.

My challenge to such a belief, is it so easy to enter when it’s all time low and how do we control the emotion? I personally think that most investors including me, are all lizard brains. We get excited when something major is going on, this explains for the market when it’s the least expected.

In order to counter this reaction, I have told myself that I have seen worse in 2008, and there are always many cycles of booms and burst. 

The most important thing is to keep a substantial amount of liquid assets for emergency and let your investment do the compounding work.

The next best thing is to also take your eyes off the market, and use an asset based approach for investment. This will reduce the jittery feeling when market is in free fall.

Good Luck!