Profiting from the latest sharemarket crash

Four valuable sharemarket investing lessons from the last GFC.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Motley Fool offers 4 investing lessons from the last GFC.

We've been saying for a while now this sharemarket is a buy. At times, our bullishness has made us look silly, unrealistic or in complete denial.

The pessimists will say we've got nothing and that this recession is different. Because it involves deleveraging on a massive scale, as companies and individuals are forced to pay back huge amounts of debt, it will be a long and deep recession.

Some might say it will last for five years or more. Some might point to Japan, where low interest rates haven't stopped its economy from seemingly being in a permanent recession since 1990.

The pessimists will also point to how on earth the governments of the world, and particularly the U.S. and U.K., will be able to service their current debt levels.

If the oil-rich Middle East and the just plain rich Chinese stopped investing in our companies and our bonds, who else would prop us up? Tibet?

Call us optimists, but we just think things will work out. When it comes to sharemarket investing, the best time to invest is in times of pessimism, and there's clearly no shortage of that at the moment.

We think sharemarket investors, sometime over the next two years, will look back on these days and think to themselves: "what on earth was I doing not buying shares at these absolute bargain prices?"

The depths of the GFC

Those four paragraphs were written by us during November 2008, at the depths of the GFC.

Back then, like now, the sharemarket had slumped. Back then, like now, the news was grim. And back then, like now, investors were fearful.

At the time, some people were leaving their cash on deposit, happy earning 3% in interest.

Some were panic-selling, worried about sustaining even further losses. And some were in a deep freeze, doing nothing.

But as those earlier paragraphs indicated, we could see beyond the pessimism and were bullish on shares.

Although markets have since plunged again, we're confident they'll again recover. We just don't know when. Investing is definitely not for wimps.

4 crucial investing lessons

Looking back, we can draw four crucial lessons:

1. Times of overwhelming pessimism can create super buying opportunities.

2. You had to suffer short-term pain to enjoy longer-term gain. In November 2008 the S&P/ASX 200 index was trading around 3,800. Yet within the next four months, it would drop a further 17%.

3. In times of pessimism, you can still be too late: Even though the market might fall further, some shares may already have passed their low point.

4. Now, like then, is the time to buying, not selling. Yes, the pessimists still say this time is different – the Eurozone crisis and threat of a U.S double-dip recession debts putting us into unchartered territory. But those smart enough to take advantage of gloom and doom can in time collect large rewards.

The Foolish bottom line

There are no guarantees in investing, but over a 3 to 5 year perspective, we reckon there's a pretty good chance someone buying shares today should earn you more than leaving your money in the bank.

We have three provisos.

1. You must be able to handle volatility.

2. You must be an optimist.

3. Do your own research and make your own investing decisions.

Good luck.

For more on coping with the current investing climate, don't miss the Motley Fool's latest special free report — What To Do When The Market Plunges. Click here to access your free copy.

More reading:

Best ASX shares and stocks

Your 13 steps to financial freedom


More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »