Market cycles

Training 765 minutesmarket cycles

You are 33, cook at a restaurant and have invested $300 a month for 4 years. The market keeps climbing and everyone talks about easy money.

Training goal: Ride a full cycle without breaking

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Situation

1. Peak euphoria: your taxi driver gives stock tips, a neighbor borrows to invest. Your portfolio is up 40% this year.

Borrow and add more
Stick to the plan and rebalance
Sell it all: this must be the top

2. The bust arrives: the market drops 35% in three months. Headlines scream crisis. You will not need this money for 15 years.

Sell and come back after the recovery
Hold and keep contributing
Delete the app and look away for a year

3. The economy is in recession. Your restaurant cuts shifts and your income drops by a third. A 6-month cushion sits in a deposit.

Sell stocks to live on
Use the cushion, cut costs and deposits
Keep investing on a credit card

4. The market jumps 8% in a week while the news is still bad. A friend waits for "full clarity".

Stay invested as planned
Wait for clarity like my friend
Sell into the bounce

What you will learn

The cycle: boom, peak, bust, bottom. You cannot time the turns.
A cushion outside the market prevents selling at the bottom.
Best days sit next to the worst: stay invested.

Your real-life step

Write a crash plan now: what you do at minus 20% and minus 40%. Keep it next to your broker app.

Questions and answers

What are the phases of a market cycle?

Usually expansion, peak, contraction and trough. Each phase lasts a different time, so turning points are nearly impossible to predict.

How often do stock market crashes happen?

Drops of 10% have historically come about every 1-2 years, and 20%+ bear markets about every 5-7 years. The broad market has recovered from all of them over time.

What should I do when the stock market crashes?

Avoid panic selling, keep regular contributions and rebalance if needed. Keep money for the next few years outside stocks ahead of time.

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Numbers are illustrative. A game, not financial advice.