Who might be happy after a stock market crash?
and who might be seriously upset?
A 10 to 15-minute read – depending on your speed.
By the end of this Insight (for investors of all ages), you’ll understand more than most people about this critically important paradox of investing.
In short, you’ll know why stock market crashes can (simultaneously) be good news for some people and miserable for others!
We know that sounds impossible, but it’s what sometimes happens in the real world.
Understanding this is essential, and the thought experiments here are the safest way to learn.
Imagine three different Investors.
Robert, Grace and Ian are three fictional investors whose experiences we’ll explore:
- Robert was thirty-five when he started regularly investing £2,000 a year to build a fund to help his child through college.
- Grace was thirty-nine when she invested a lump sum of £20,000 for growth towards a college-fund goal for her children.
- Ian was approaching retirement and, among other investments, had a pension fund worth £100,000 – from which he withdrew a level income of £7,200 each year.
We’ll assume these three people invested in the same investment fund for the same ten-year period – and yet had very different emotional reactions (surprise or shock!) because of their very different financial outcomes.
We’ll dig into why this can happen, in a moment, but first, we must say something about their investment fund.
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