The ALL ORDINARIES (Index: ^AXJO)(ASX: XJO) index will crash sooner or later — but the only thing we can do is be prepared for it when it hits.
When will the Australian market crash?
Some investors believe a market crash is around the corner.
For example, just this morning, I heard one professional money manager say that bull markets have never lasted more than 10 years. Then he said:
'The current bull market is nine years old.'
By my calculations that means…10 minus…one…equals…hmm, that can't be right…one year!
Oh no!
Quickly!
'Martha, grab the baked beans (forget the kids) — we're going bush!'
Not so fast
The thing about the finance industry is that — and I can say this because I'm a finance guy — nearly everyone is dodgy.
They want you to act now. Sell. Buy. Don't hold. Just sell. Buy. Then Panic.
And in no particular order.
What do they get out of it?
Some of my cronies get commissions.
Others have their face printed in a newspaper if they say something crazy like 'The ASX will crash to 2,000 points in June'.
Other shiny suits just want to get a viral video on YouTube.
It's all a ploy to get you to do something. Anything. Just react.
As the saying goes, even a broken clock is right twice a day (just ask Marc "Dr Doom" Faber).
But, here's the kicker: If you accept the market is going to crash, your life will be a lot easier.
Just accept it.
Australia's All Ords and S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), the USA's Dow Jones and London's FTSE 100.
They are all going to crash.
When?
I don't know. Frankly, I don't care.
1 way to double your investment returns
Last week, the co-founder of the Motley Fool, Tom Gardner, said the easiest way to double your investment returns is to double your holding period.
That's easier said than done, of course. (see: hysterical finance goons, above)
But if you accept that market crashes are evitable, you hold a diversified portfolio of local and international shares, and you have at least three months of living expenses in cash — there's really nothing else you can do besides holding the appropriate personal insurances.
Maybe I'll just wait for the next market crash?
And then what? Buy shares cheaply?
Why didn't I think of that!
Well, psychologists have proven (repeatedly) that you won't. There's this thing inside all of us, called 'loss aversion bias', which prevents us from putting our money at risk — even if it is more likely that we'll make a positive return.
And, in my experience, the people who 'pitch a term deposit tent and wait for the next crash', are those who are least likely to invest when markets fall.
Foolish Takeaway
The All Ordinaries, one of Australia's leading sharemarket indices, could crash today, this month or this year — there is no way for anyone to know for sure.
Just keep a cash buffer, build a diverse portfolio and hold for the long-term.
Simple.
