November 20, 2013

What was the dot.com bubble and why is it important for the average investor to know their investing history?

2 thoughts on “November 20, 2013”

  1. Alex Christianson says:

    It was extraordinary speculative investment investment in information technology during the years 1997-2000. The stocks, like all bubbles, rose greatly in value quite quickly and then suddenly without notice, prices cascaded far down. Some people make off of bubbles well, but there are always unfortunate investors who spent much of their money, and then panicked on the quick roller-coaster fall down and sold out, losing much of their money, putting them in a tough spot financially. It is important to know about bubbles to know not to throw so much at it that you risk pretty much losing everything that you have. These are dangerous and should be recognized and avoided.

  2. Mike Finley says:

    Well said, Alex. Let’s recap.

    The dot.com bubble led to catastrophe for many, many people. Why? They got caught up in the frenzy of buying high flying (and no revenue producing) technology stocks. The frenzy? The crowd said you need to buy NOW or you will miss out. The crowd is wrong much of the time. Bubbles are built based on speculation (educated guess) that some other sucker will pay more than you. One day, there are no buyers, and that is when the bubble goes pop and the price drops, and drops, and drops.

    It is critical to know your history so you can avoid making some of the same mistakes made by others in the past. This means learning about tulip mania, the dot.com bubble, and the current housing bubble to name just three. You can lose your entire life savings by chasing after the latest and greatest investment (many people have done this recently with Gold and Silver). Know your history and avoid bubbles!

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