Why Millions of Americans Should Hope For A Stock Market Crash

falling

I hope stocks fall.

That might sound pretty strange.  But not everybody should be cheering for the same team.

In fact, about 125 million Americans should wish for stocks to stagnate, dip or downright crash. That’s roughly the population between the ages of 25 and 55. 

A smaller number of people (about 76 million) should prefer stocks to rise. That’s the population of Americans above the age of 55.

Image by Pixabay

Read Why I’m Hoping the Markets Crash in My AssetBuilder Article





Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I’m happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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18 Responses

  1. Ben says:

    I’ve read your first book and I will probably read it again soon. I have also read some of the books on your recommended list, but I do not consider myself an advanced investor, at all. I am in my 30’s and I invest 10% of my income into index funds at the end of each month.

    So stock markets have been falling this week. Do I ignore the market and keep investing at the end of the month, even though stock markets may keep falling? Or should I wait for a few weeks and see how low it can go?

    I am also in a unique situation right now because I want to invest a relatively large sum into my index portfolio. For that amount, I really do want to invest at the lowest possible.

    How did you do it in the 2008 era?

    • Ben,

      Whatever you do, don’t speculate. Stick to the game plan. In 2008, I simply bought the index each month that kept my portfolio aligned with my goal allocation. I didn’t speculate as to whether the markets would drop further or rise. That’s the drug you have to avoid. That’s the drug that almost everyone falls for. When one of my indexes fell further the following month, I added money to that same index again, the following month. When, as I mentioned in my book, I could no longer keep adding enough fresh money (in 2008/2009) to keep the portfolio aligned with my goal allocation, I sold bonds to add to the stock indexes. I didn’t try to “time” the market. Nobody can do that. After I did that the first time, the markets kept falling. So the following month, I added more fresh money to stocks and sold some bonds. No games. No speculating. No foolish behaviour. It’s a lot more profitable (long term) to keep your heart out of the game.

      Cheers,
      Andrew

  2. Ben says:

    I should add that I invest through my TFSA and RRSP on the TSX as follows: 30% VCE, 30% VUN and 30% XEF. The remainder is high grade bonds. I don’t mind risk – my wife has a phenomenal government pension so for good or bad, I kind of consider that our “bond investments” because it is guaranteed (they even up it for inflation!)

    • Ben says:

      Hi Andrew,

      I read your article about Singapore. My international ETF is iShare’s XEF. It only has 1.33 % invested in Singapore.

      So my question is this: If I want to invest in Singapore’s economy more, should I stick to VCE, VUN and XEF? Or should I include another index fund that focuses more on Singapore?

      I find it challenging to decide what index funds I should use – there are too many options. How many index funds do you invest in? For a Canadian that will stick with the plan for 25 years, what are your thoughts about VCE, VUN and XEF as a balanced portfolio?

      • Ben,

        Don’t make a simple solution complicated. Ensure that you have Canadian exposure, U.S. exposure, a broad international index and a bond index. Alternatively, you could have one global index fund (that includes the U.S.) and a bond index representing Canadian bonds. The actual products that you choose don’t matter as long as you have exposure to all of those regions. You can see the ETFs I put in my book, the Global Expatriates Guide To Investing. They are good samples, as are many others. http://bit.ly/globalexpat

        Cheers,
        Andrew

      • Ben,

        To reply further, the ETFs you listed above are fine. But make sure you have a bond component. Vanguard’s Canadian bond index (VSB) is a good one.

        If you want to add a small sum to Singapore stocks, choose the ETF that I linked to in the article. But make sure you don’t invest (ever) more than $60,000 into it. It’s market value should remain below $60K no matter what. Remember the U.S. estate tax laws, pertaining to U.S. domiciled ETFs. You can read more about that in my book.

        Cheers,
        Andrew

  3. Fred says:

    Well it looks like it’s happening right now. Stocks are falling worldwide. Personally I have only bought my stocks right now (in various indexes). I still have my money allocated to bonds in cash. Now if there is a sharp drop worldwide in equity, wouldn’t it be worth using this cash to buy more stocks and save up more cash to do the bond purchase in 9-12 months? This would mean that temporarily my portfolio would be all stock but in 9-12 months it would be pretty much balanced with 30% bonds / 70% stocks

  4. Ben says:

    Thank you, again. I am not an expat but I think I might be able to gain a lot from your book. I just ordered it.

  5. Larry says:

    Hi Andrew,

    I read your first book when it first came out and invested in the E series funds. Unfortunately, my financial advisor found out and pressured me to close the account. I am now in the process of starting the process again. These will all go in my TFSA in Canada should I return to the E series or look at the Vanguard products as they were not available in Canada when your first book launched. Could you give me a run down on which E series you would use I assume it would still be these? (TD Canadian Index Fund – e, TD International Index Fund – e, TD U.S. Index Fund – e, TD Canadian Bond Index Fund – e) and for Vanguard which ones to pursue or the advantage of the Vanguard funds.

    Thanks in advance have both your books and in the midst of your second

    • Hi Larry,

      You have many excellent options as an expat. But unfortunately, TD’s e-Series products are no longer available to you. I’ve written, at length, about what you could buy here: http://bit.ly/globalexpat

      Cheers,
      Andrew

      • Larry says:

        Hi Andrew,

        Sorry I should have been clearer I am based in Canada but was turned on to your books. Using them as a non-expat hope that still works?

        • Hi Larry,

          The products that I recommended in the book still apply. I show what ETFs Canadians should buy, whether they want a Permanent Portfolio, a Cap-weighted portfolio or a fundamental indexing portfolio. I explain each of these types (along with pros and cons) in the book. I think you’ll find it interesting and helpful.

          Cheers,
          Andrew

  6. Vi says:

    Hi Andrew,

    Great books! I have only 1 burning question.

    I’m a Dutch national living/working in Singapore. Why is it advised to have a domestic stock index fund to represent the home country stock market? Why not only have an international stock market index to provide full global exposure?

    If hypothetically, a person is not planning to go home anytime soon as well.

    Thanks, Vi

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