The financial market meltdown of 2008-2009 had the effect of wiping out many individual investors and as some pundits say, losing an entire generation of investors. I think it is human nature to act according to the saying “once bitten, twice shy.” That is exactly what millions of people think about the stock market after getting brutalized following the housing-related crash.
It didn’t help much that it appeared those who were responsible for the crash, ie big banks, ratings agencies, and Wall Street, got bailed out while the individual was left to die. This led many to believe that the game was rigged in favor of the big boys, and that the field was not even close to being level. I certainly don’t blame anybody that lost money and came to that conclusion.
Slowly Dipping Toes Back
The market more than doubled off the lows hit in March 2009 and many retail investors slowly waded back into the investing waters, thinking that the train was leaving the station. Money started to flow back into mutual fund and ETF’s, which was a sign that the little guy was regaining some lost confidence. The vigorousness of the rally off the bottom was breathtaking, inspiring some faith in the markets. Was it premature?
BOOM! Confidence Lost Again
Just when they thought it was safe to go back in the water, Jaws in the form of our inept government and the European debt crisis slammed them to the floor again. In the span of a week, the Dow fell over 500 points twice, which is enough to scare the pants off of even the most seasoned investors. I have a feeling this downturn (which is not over yet by any stretch) will kill off many retail investors who were on the fence about getting back into the market. They will say “enough is enough” and swear off the stock market forever.
This is a shame because over long periods of time, stocks are still the best game in town, although it seems like our leaders are trying to do everything they can to make this false. Funds have been flowing out of mutual funds and I expect this to continue for the foreseeable future. Unless something drastic occurs to help stabilize the market, and there is no further shock in the next few years, say goodbye to a whole generation of investors.
The Scarring Of The Individual Investor is an article from: