[Summary]
The bursting of the Japan bubble is Japan's experience of overheating and long-term adjustment in asset prices.
What is most likely to fail when the Japanese bubble bursts is not so much the lack of knowledge itself, but the fact that one hastily made a decision and later justifies it.
In actual investment, the starting point is to look at the relationship between real estate, stock prices, and credit expansion. However, it should be noted that it is easy to apply Japan's experience to all countries.
In this article, we will explain the bursting of the Japanese bubble not as "knowledge" but as a procedure to confirm before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
First thing to know about the bursting of the Japanese bubble
When looking at the bursting of the Japanese bubble, the first step is to determine what you want to judge. The information you need will change depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. The bursting of the Japanese bubble is not the only factor in making a decision. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
Situations where it is easy to fail when the Japanese bubble bursts
If we look at the bursting of the Japanese bubble as a failure pattern, we must first make narrow assumptions. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
If you check the following points, things will be much more organized.
| Axis to check | What we saw when the Japanese bubble burst |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
When Japan's bubble bursts, it's not just the lack of knowledge that causes us to stumble. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Don't decide to buy or sell the moment you see the Japanese bubble burst.
- Do not mix the time frame that matches the bursting of the Japanese bubble with your own holding period.
- Don't increase your position to recoup your losses
- Don't make a decision just based on SNS or rankings.
What is important here is not to assume that the collapse of the Japanese bubble is the only correct answer. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Before using the collapse of Japan's bubble as a basis for making an actual decision, please check at least these five points.
- Can you explain in one sentence the purpose of watching the Japanese bubble burst?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of confirming the bursting of the Japanese bubble is not to act quickly, but to reduce unnecessary errors in judgment.
Summary
The bursting of the Japanese bubble is a useful material for reorganizing investment decisions. Even if you read it as a failure pattern, treating it as a standalone buy/sell signal will lead to poor judgment.
The points to keep in mind are as follows.
- Decide first the purpose of watching the Japanese bubble burst.
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. The collapse of the Japan bubble should not be used as an excuse to rush into judgment, but rather as a tool to pause before buying or selling.