Chapter 6. Don’t Fear the Unknown

 

“The only thing we have to fear is fear itself.”

 
 --Franklin Delano Roosevelt, in his first inaugural address, on March 4, 1933
 

“To conquer fear is the beginning of wisdom.”

 
 --Bertrand Russell, 1950

This chapter deals with what most investors fear: the unknown. The truth of the adage that “the stock market hates uncertainty” was driven home in the second half of 2007 when the problems in the subprime mortgage market infected the entire credit spectrum and sent stock prices tumbling. Indeed, the plunge in the prices of U.S. mortgage-based securities shook the global financial markets.

But let’s not forget that such waves of uncertainty and fear are inherent in the stock market. We have had market crashes galore ...

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