Below are some key lessons:
1. In a global economic meltdown, U.S. and foreign markets are very highly correlated in the short term and generally move in the same direction.
2. Market conditions will eventually get better after a severe market downturn.
3. Don't time the market by trying to "catch" its highs and lows. Most market timers miss the "best trading days" that occur after market downturns because they have moved their money out of stocks and are not in the market when stocks rebound.
4. Uncertainty leads to fear, and fear leads to panic. The worst time to panic (as an individual investor) is during a market panic.
5. If you are retired or about to retire, set aside a substantial cash cushion to provide funds to tap for living expenses so that you do not need to sell stock during a market downturn.
6. People's investment risk tolerance (i.e., how much investment risk individual investors feel they can take) tends to track market indices, and investors tend to be more conservative (i.e., they want to own less stock in their portfolio) during bear markets than bull markets.
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