The most recent market correction was nothing compared to events from the past. Here are the five biggest asset bubbles of all time – a reminder that market dips are inevitable, but that history can give you perspective and emotional resilience you otherwise wouldn’t have, counsels Gav Blaxberg, CEO of Wolf Financial.
1. Tulip Mania. Nothing of such low utility has blown up in price like Tulips in 1637. At the bubble's peak, tulips were sold at the equivalent price of luxury homes. Their rarity, combined with wealthy people’s desire to have them, caused this bubble.
2. Dot-Com Bubble. The hype surrounding the Internet was huge at its peak. From 1995 to 2000, the Nasdaq Composite Index rose 800%. Then it fell 78% from its market peak in 2000.
3. Japan 1989. Thanks to economic expansion and low rates, Japanese real estate and stock prices soared. Around the peak, the Japanese imperial palace was worth more than all the real estate in California. Many consider this the greatest bubble ever. To this day, some asset prices haven’t recovered.
4. Great Recession. Zero percent down payments and subprime mortgages inflated American home prices. Home prices doubled on average from the late 1990s to the 2006 peak. When it all crashed, 2.9 million homes were in foreclosure – the highest number ever recorded.
5. The Great Crash. The roaring 20s created an asset bubble that peaked in September 1929. Adjusted for inflation, stock prices rose almost 7x throughout the decade. It was one of the biggest bubbles of all time – and its bust helped fuel the Great Depression.
Educating yourself on prior booms and busts can help prepare you. There’s no better investment than the space between your ears.
