[LeThanhPhong]

(Quora) No one knows for sure, but in your opinion, will there be a second massive fall in the stock market in 2020 or 2021? What is your best guess on why and when this will happen?

Answered by Adam Fayed:

As you say, no one can know for sure. If it was easy to predict the stock market consistently, then market timing would work.

However, even amongst finance professionals, I don’t know one person who has done this over 20 years and shown prove.

I don’t even know one person who knows one person who has done this, especially net adjusted for the fees and taxes.

Look at recent times. I don’t know one person who predicted all of these events just in the last 4–5 years:

• Markets would rise after Trump’s election
  
• UK markets would hit record highs 2 years after Brexit in 2018
  
• US Stock Markets would hit record highs during big geopolitical tensions with North Korea and China in the first half of 2018
  
• US markets would fall 20%-25% in late 2018/early 2019, despite lower tensions than in the first half of the year
  
• US markets would then mount a quick recovery despite a government shutdown
  
• US markets would hit record highs during the start of the coronavirus pandemic (Jan-February), only to panic in March after the shutdown, only to rise to records recently in the case of the Nasdaq at least
  

If we go back further than 5 years, you can see ever more unlikely events. Almost everybody thought China and the BRIC economies were good bets, especially in the 2000s when they outperformed before the 2008 financial crisis.

The overall trend of Chinese stock markets have been falling overall since 2006, despite seemingly strong GDP growth.

If you put a gun to my head though i doubt there will be a “huge” fall of say 50%+. I could be wrong.
One thing i do know is if that does happen, there is nothing to worry about because markets will come back and it is a great time to buy.

The average bear market doesn’t last long. Even in those periods where they do, the “break even” rate is only assuming you don’t keep putting in fresh money during those bad periods.



So the only people that need to worry about market crashes are those in retirement or close to retirement age, and assuming they have 100% in stocks, which is foolish for older investors.

Buy both stocks and bonds throughout your working life, rebalance during the bad times for stocks, and you will be fine.

And remember something. Who outperforms in investing? Dead people. Dead people’s accounts consistently do better than the living, including many knowledgeable people.

The reason is simple. Dead people have no emotions so they can’t be influenced by the media.

They have no choice but to buy and hold unless somebody informs the investment platform about the incident.

The same thing can be seen with dormant accounts. Some people forget about smaller investment accounts they took out decades ago.

These accounts often outperform for the same reason. There is an important lesson here.

Some Reading

• Elon Musk Becomes Wealthier than Buffett
  
• Don't Expect African Stocks To Outperform
  
• How to become rich by investing
  
• Adam Fayed Podcast
  

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