Not only are alternative investments very often poor performers, but their lack of liquidity means giving up the greatest opportunity that
happens during a stock market crash: rebalancing.
If the worst case scenario occurred and all 5 of your shares
fell during a stock market crash you would limit your total losses to $ 10,000 instead of $ 50,000.
Similarly during stock market crash it doesn't matter how well - experienced or well - qualified an analyst / investor is, it is next to impossible to save equity only portfolio.
«Investors often want to dump
shares during a stock market crash because they want to cut their losses and because they fear even greater declines,» said Kelly Shue, a professor of finance at the Yale School of Management.
For example,
during a stock market crash, a person practicing this discipline would be adding money to his or her stockholdings, while during a real estate crash, he or she would be pouring money into the acquisition of income properties.
After all, they are securities and
during stock market crashes, they tend to go down with the rest of the market.
During stock market crashes, even the most solid blue - chip companies can take double - digit losses.
During the stock market crash of 2008, the speculator's stock tumbled 65 % while the investor's stock only fell 6 % to the March 2009 low.
During the stock market crash that started in 1929, stocks dropped about 80 % from their highs to their lows.
During a stock market crash, stocks plummet in value... but bonds increase, because investors start to seek safe returns again.