When Stock Market Bubbles Pop

4 horrible assumptions investors make every time a stock market bubble ends

Edward Iftody

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Damn. How low are these stocks going to go? — Photo by Ave Calvar on Unsplash

Inflation is high and rising. Stock markets are crashing due to Putin’s war and the rising odds the war in Ukraine will push the US economy into stagflation and recession.

It becomes more clear by the day that some of us have unfortunately have been sucked into the stock market at precisely the wrong time and bought stocks near the peak of a wildly overvalued stock market. Yet, rather than trying to limit the damage, human nature will cause many of us to hold on to our bad investments — all the way to the bottom. This psychological phenomenon is called loss-aversion — a well-known reaction to loss.

Unfortunately, loss aversion isn’t limited to novice investors. Even experienced investors can fall victim to loss-aversion whenever they make one of the 4 horrible assumptions so many investors make every time a stock market bubble ends.

Vladimir Putin

Vladimir makes 4 horrible assumptions

Putin’s big dream has always been to re-establish the Soviet Empire and Ukraine has always been the key to that dream.

But that big dream is quickly becoming a nightmare. Russian troops are facing fierce resistance from the Ukrainian people inside the country and the Russian economy is facing crippling economic sanctions from much of the democratic world.

The plan was to take over Ukraine and install a new puppet government. The Ukrainian people were supposed to welcome the Russian army into their country. The Ukrainian government was supposed to collapse immediately or at least flee the country. The Ukrainian army was supposed to surrender at the first sign of fighting.

This has already cost thousands of Russian soldiers, hundreds of Russian tanks, and who knows how many Ukrainian lives, yet there is no end in sight. Rather than admitting he has made a terrible misjudgment and withdraw troops after realizing this war isn’t going to plan, it appears Putin is going to soldier on — regardless of the cost to human life.

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Edward Iftody

Edward Iftody is a Communication Coach, author of Surviving Work, a veteran of the Canadian fin-tech industry and a blockchain enthusiast.