It must be tails next (the gambler’s fallacy)
When this chapter originally appeared in Shares magazine in October 2010 here is what I wrote.
The great 1990s technology and Internet bubble market climaxed in early 2000. Until then almost anybody could make money in the stock market. However, from that point onward, it became progressively more difficult. Although the overall market made new highs in mid 2001, we needed to have been skilled at picking the right stocks. Then the market plunged in the second half of 2001, frightening most of the 1990s newcomers out of the game. By early 2002, the market had regained all the lost ground, but not for long as it plunged again to a low in March 2003. Many of the 1990s crop of investors were now long gone or nursing horrific percentage losses.
Since March 2003, the Australian stock market has been trending upward very strongly and consistently. It has been an excellent period to have been fully invested in stocks. Yet many private investors have been far from fully invested. Many are still largely sitting on the sidelines.
I am sure that as you read this passage you will be struck by how it might have been written today.
The bull market that rose on the back of the mining boom began in 2003. For five years, almost anybody could make money in the stock market. Australians felt wealthier and binged on debt. However, symptoms ...