When is it too Dangerous to be Invested in the Stock Market?
Danger is only present when you
- have no clue what the hell you’re doing.
- are following someone else’s advice.
- have a fundamental misunderstanding of what the stock market is.
- are using the stock market as a pump and dump/get rich quick scheme.
When you’re investing in companies that you understand clearly, that danger is not present. I have invested in a small number of companies over 12 years now, and there hasn’t been a bad investment. There have been bad moments of unrealized losses, but the market and its participants finally agreed with my initial thoughts many years ago.
- I understood the technology.
- I invested through major economic setbacks (2008 crisis) and was largely unaffected.
- The investments I made were unknown technology companies (back then) and were fairly boring to the average person.
So, no. The answer is and will always be no.
If you have no idea what you’re doing, the best thing for you to invest in are index funds. If you have a large amount of money, the best thing to do is look up hedge funds with great track records and call somebody up. Most of the greatest hedge funds are naturally exclusive and closed to outside investment. It never hurts to try, though.
Everything else is hot air. There are no insane stock picks. Whether something is dangerous or not right now is a matter of chance. There isn’t a right balance and there isn’t a ceiling for how much you can invest — unless you’re a billionaire, in which case you’re probably not reading this because you can move the entire market.
There are no silly one-liner quotes that explain the market succinctly. There are highly intelligent and mathematical people consistently making great money and there are index funds. If you are completely confused and you don’t need the money for a few years, the safest thing to do is to get into index funds. The committee on the S&P 500 try to make sure it will always ultimately grow.