Before The Next Stock Crash, Watch This – 10 Lessons From History (European Investor)

追加: 2026-05-03

[00:00:00]The next big [music] stock crash is always around the corner. Whether it's Trump or AI or something else, eventually the market will crash.

[00:00:08][music] And as investors, we've got to be ready.

[00:00:11]So, what does history teach us? Well, for the first two lessons, let's go to January 2020 when I was a pension fund CEO. We had just finished a fantastic year. The S&P 500 stock index earned more than 30% in 2019. All our clients were happy and 2020 looked bright ahead.

[00:00:30]Wall Street strategists predicted another positive year, but then disaster.

[00:00:35]>> Today, the World Health Organization officially announced that this is a global pandemic.

[00:00:41]>> The COVID pandemic broke out. Headlines [music] warned of a global economic collapse.

[00:00:46]The S&P 500 crashed [music] 34% in March. My pension fund clients were scared. I got a lot of worried calls. And honestly, I was losing sleep myself. On [music] March 23rd, the Wall Street Journal ran an article which said, "As fast as the downturn has been, many fear the worst has yet to come."

[00:01:05]But it turned out the worst had already come. March 23rd was the exact bottom of the crash. The very next day, the market began to recover, and within weeks, half the losses were gone. By late May, the market was within 12% of its prior high.

[00:01:21]And by the end of the year, the S&P 500 had earned a whopping 18% total return, way above historical averages. So, here are two lessons the COVID crash taught us. First, market crashes are often absolutely impossible to predict. They can be triggered by things like pandemics, natural disasters, or terror attacks, which nobody sees coming. As an investor, don't live in the illusion that you will be able to anticipate and avoid a market crash. Instead, build a portfolio that can survive any crash.

[00:01:54]And a bit later, I will show you how to do that. The second lesson is that market recoveries are also unpredictable. Sometimes crashes can last for years. Other times, they are over in a flash. So, if you panic and sell your stocks in the middle of a crash, there is a big chance that you will miss the recovery and lose money permanently. Now, at our pension fund, we actually came through the COVID crash great because we didn't panic. We never sold. We stuck to a simple effective strategy which I will explain later in the video. But for now, let's move on to the next few lessons courtesy of the big financial crisis which started in the fall of 2007. This is when I was a young banker working at UBS on Wall Street.

[00:02:36]>> Nearly a quarter of a million homeowners are in danger of losing their homes.

[00:02:40]>> Soaring gas prices, falling home prices, and rising unemployment. Today, when I talk to younger investors, they often tell me, "Well, Tom, you were lucky to be around back in the financial crisis.

[00:02:51]I mean, it was such an amazing opportunity when stocks fell by 50% in 2009. I mean, it was the best time ever to buy, right? But I remember what it felt like working on Wall Street in 2009. I would talk to experienced investors who were scared. They said, "If a few more things break, the whole financial system is going to collapse.

[00:03:12]will have a depression that lasts 10 years. Looking back from today's perspective, I mean, we can all see the charts. We know that 2009 was the bottom of the crisis and it was a wonderful opportunity to buy stocks. But at the time, nobody knew if this was the bottom or if the market was going to keep falling and falling. And as we'll see in a minute, there have been bigger crises in history where 50% was not the end of the story and the market did keep falling. So the lesson here is this.

[00:03:40]Guessing market bottoms is not that easy. When you're in the middle of a crash, you should not wait for the next crash hoping to buy at the bottom. The next mistake I want to explain is super super common with beginning investors.

[00:03:53]It is very important that you avoid it.

[00:03:55]But before I explain it, I wanted to say this. If the market has you a bit worried these days with all the headlines about Trump and geopolitics and everything else, that's totally understandable. So that's exactly why I write a newsletter for European investors. I send it out every week and I discuss market events, investing insights for people who live in Europe, and general personal finance tips. If that sounds interesting, you can sign up for the newsletter by following the link in the description. Okay, but here's the next lesson also from the global financial crisis. This is a lesson that I learned in a painful way from my own mistake. You see, back in 2007, I was a young banker on Wall Street. And for the first time in my life, I had some money.

[00:04:34]I had $10,000 sitting in the bank that I wanted to invest. But um the financial crisis started and I got scared. I saw the market dropping week after week. I saw my employer UBS announcing layoffs and layoffs and some more layoffs and I thought, "Okay, I'm just going to wait until things calm down a bit." Now, my mentor at the time actually told me that I was an idiot. He said, "Look, you know, when the market goes down, it's often the best opportunity, but I just couldn't get over my fear and I didn't start investing." And of course, in retrospect, that did turn out to be a big mistake. And it's a mistake that I've seen so many other people make over the years as well. For the past decade, I've been an investment trainer. And pretty much every week, some student asks me, "Well, isn't the market a bit crazy right now? Shouldn't I wait for things to calm down?" But this is a very dangerous attitude to have because when things calm down, that is usually when stocks are going up. And that means that if you only invest when things calm down, you only invest when stocks are expensive. And this gets you relatively poor results. So the lesson here is don't wait for things to calm down before you start investing. Now, if you ignore the next lesson, this could possibly be the most expensive mistake you will ever make. It was for my friend Jerome, who had to sell half his stock portfolio at the bottom of the financial crisis in 2009. He did not want to sell.

[00:06:02]He realized that stocks were really cheap at that time. But the problem was he was out of money. He had to take care of his family. He had to pay for rent.

[00:06:10]He had to pay for schooling. And he simply needed the cash. So he sold at the worst possible moment and he never recovered those losses. This happens if you fail to have a safety cushion. You need to have an emergency fund, some cash that is sitting aside for a rainy day. Because when a crash starts, it is often a time when your income goes down.

[00:06:32]Maybe your business is doing poorly or you lose your job. And if you don't have reserves, you may end up forced to sell your stocks at the worst possible time.

[00:06:40]For the next lesson, let's go back in history to a little bit before my time.

[00:06:45]Wall Street, the business of America is business, announces the new president, Calvin Kulage. October 28th, 1929, Black Monday, the Dow Jones Index in America fell 12.8%. [music] The next day, Black Tuesday, the Dow fell another 12%. And in fact, the market kept on falling that year, and by November 1929, the market had dropped by around half. And the thing is, the story didn't end there. There was a big rebound in the market in 1930. But it turned out that this was just a bit of false hope. The world was still early in what would become the Great Depression.

[00:07:25]The biggest crash came in 1932 where the market ended up 89% below its all-time high. In fact, the 30s saw multiple false rallies where the market recovered, people got optimistic, and then it crashed again. So, that's an important lesson to keep in mind. you should be mentally ready that sometimes crashes can be longer and more painful.

[00:07:50]That said, the stock crashes of the Great Depression also have a more positive lesson to teach us. And this was really driven home to me when I recently read Andrew Ross Sorcin's excellent book 1929, Inside the Greatest Crash in Wall Street History and How It Shattered a Nation. Wonderful book. I highly recommend it. I was just amazed to read about how back in the 1920s, stock market manipulation was completely legal and accepted. The richest people in America would get together to run pump and dump schemes, just ridiculous market manipulation. At the time, bankers would lend irresponsibly to regular people so they could buy stocks on credit, pushing up the market. So on the one hand this is quite a disturbing picture but on the other hand it's also encouraging because today financial regulation is much stricter and that means these kind of crazy markets are less likely to repeat. Although I am concerned around what is happening in Donald Trump's America today with all the insider trading that is happening around Trump's decisions and so forth.

[00:08:55]Next up October 1973 when Egypt and Syria invaded Israel starting the Yam Kipper war. At that time, Arab oil exporters imposed an embargo which [music] pushed oil prices up globally almost four times. And this had a devastating [music] impact on the stock market. By October 1974, the S&P 500 had crashed 48% from its January 1973 peak. Between 1972 and 1980, the US market did return an average of 6.5% per year, including dividends. But the problem was this was largely an illusion because the real lesson from the 1970s crash is hidden under the surface level figures. You see, this was not just a market crash.

[00:09:41]It was a global inflation crisis.

[00:09:44]Because of high energy prices, the cost of pretty much everything in the economy shot up like crazy. So $1 in 1970 could buy a lot more than $1 in 1980. And after you adjust for inflation, the S&P 500 didn't actually recover its full 1972 heights until 1984, 12 years later.

[00:10:06]Now, this was followed by several decades of really strong performance.

[00:10:10]But the 70s were a painful, painful time for stock investors. And one of the key lessons here is that when you look at historical charts of the markets, you shouldn't just look at the nominal numbers. You've got to pay attention to inflation as well. All right, for the next couple of lessons, let's move forward to September 1999. Time magazine published an issue with the cover getrich.com, Secrets of the New Silicon Valley. The internet revolution was in the air. Tech companies like Yahoo and Amazon and pets.com were going to change the world.

[00:10:44]The NASDAQ 100 index of [music] tech stocks rose a massive 102% in 1999. Then the.com bubble burst on April 14, 2000.

[00:10:56]The NASDAQ fell 9% in a single day. It lost over 34% of its value within a month. And the market [music] continued to fall for over 2 years, wiping out nearly 80% of the NASDAQ's value. Now, the way I see it, there are two lessons we can learn from the dot crash. First of all, great technologies can still be terrible investments at the wrong time and at the wrong price. The internet revolution did completely change the world. But 1999 was the wrong time to be buying internet stocks at the high prices available at the time. And this is an important lesson to keep in mind with the AI revolution today. Of course, I cannot predict exactly how this revolution is going to play out, but there's a big chance that many of the big AI names today might not end up being the big winners 5, 10, or 20 years from now. And the other lesson to learn from the dotcom crash is by comparing different market indices. So the NASDAQ is a techheavy index. It was impacted very directly by this dot revolution.

[00:12:01]The index fell hard in the crash and it didn't fully recover until 2014. By contrast, the more diversified S&P 500 index, which included not just tech stocks, but a lot of other industries as well, returned to its peak in half the time in just 7 years. And the globally diversified Msei World Index recovered even a bit faster. And the lesson here is that concentration risk, putting all your money into a single industry, it can feel really smart in the middle of the boom, it can make you a lot of money, but when things crash down, it can really, really hurt you. So, if you want a less stressful experience as an investor, you might want to spread out your bets a little more. So, looking at all these lessons from history, what is the best way to prepare for the next market crash? Well, the first thing you need to do is make sure you have a good safety cushion. And I'm not talking about just €1,000 sitting in the bank.

[00:12:55]I'm talking about enough money to support your family for at least a few months. If you are a business owner or if your income is unstable, you might need enough cash to last you for 6 to 9 months because when a crash happens is often also the time when your business struggles and when your income falls.

[00:13:13]The second step you need to take is make sure that the risk level in your portfolio is appropriate. If you are 65 years old and about to retire, you should not have 100% of your money in the stock market. So, make sure that the amount of risk you're taking, the stock allocation in your portfolio matches your age and how much risk you're happy to take. The next step is diversification. Make sure that your investments cover different regions, different industries, and potentially different company sizes. So, large cap, midcap, small cap. And then just as important as these practical steps is adjusting your mindset. You need to move away from somebody who fears crashes to somebody who fully expects crashes and is ready for them because the markets are cyclical and crashes come and go.

[00:13:58]You cannot avoid them as an investor.

[00:14:01]Now, in my view, the easiest and most reliable way to do this is by becoming a passive investor. So, this is where you buy passive investments like ETFs and index funds and you stick to your strategy as the market goes up and down without reacting to market news. This is exactly how my pension fund stayed safe during the COVID crash. And that's exactly how I'm investing my family's money today. If you live in Europe and you would love to learn how to invest in ETFs, I've actually put together a training where I go step by step through everything you need to know. So, go watch this video next to find out