As this piece by William Goetzmann explains, bubbles and market crashes make for great horror stories, but research shows how rare they are—and that the consequences aren’t all bad. The story of American bubbles and spectacular crashes might lead one to think that the stock market is a perilous place, best left to experts or those with cast-iron stomachs. However, one of the biggest mistakes an investor can make is to rely on a handful of colorful historical episodes and ignore the long intervals in between: the sequence of quiet gains that markets have made over the decades and centuries they have existed.
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