Can successful investors predict changes in the markets? Some can but others miss the market’s signals.
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Successful investors can predict changes in the markets, right? Wrong.
Let’s look at the three most significant drops in stock prices during the past 25 years:
On Monday, October 19th, 1987, the Dow Jones Industrial Average fell 508 points, over 22%. Program trading, overvaluation, and market psychology may have played a role in the sudden decline.
On September 17th, 2001, the first day of trading after the terrorist attack on the World Trade Center, the Dow dropped nearly 685 points, at the time, its biggest one-day point decline in history.
Beginning on October 6th, 2008, the Dow fell 1,874 points in five days, its worst weekly decline ever. The causes of this decline are still subject to debate.
Though all three had different causes, these drops had one factor in common: They caught most by surprise. If we can’t predict market swings, is there a secret to success? One idea is to follow smart investment strategies and periodically review your approach. Remember, when you chase the market, it’s easy to fall behind.
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