Investment Science has used SageFusion, a product to push a button, and make money to conduct stress tests during financial panics. While Investment Lab is not for sale or the general public to use, we do have a large data-warehouse to conduct financial analysis and stress tests when market panics occur. This data-warehouse could be used to verify whether or not your clients' portfolios are overexposed. What we did here was look at the maximum and minimum values of financial instruments during market panics. If you recall, back in 1987, 2009, and 2020 the stock market crashed. This is why it is important to question when many financial experts state to only go 'long' in the stock market, and 'buy and hold' because these draw-downs could occur the year you want to retire, and it could take a large amount of time for the market to recover. Likewise, many consumers unfortunately believe that gold is a safe bet for market volatility. However, gold crashed 60% in 2009, and 30% in 2020. The reasoning behind these market crashes is that firms and individuals will conduct a 'flight to safety' in which every single asset is sold, inclusive of bonds. Almost everything crashes together as well, due to the fact that ETFS (An exchange traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occasionally occur) contain many stocks, so when these ETFS are purchased and sold, there are ample scenarios where every single asset class moves together, so diversification even won't help. To conclude this post, please open up the attached spreadsheet to see what your draw-down (A drawdown is the negative half of standard deviation in relation to a stock's price. A drawdown from a share price's high to its low is considered it's drawdown amount. If a stock drops from $100 to $50 and then rallies back to $100.01 or above, then the drawdown was $50 or 50% from the peak) would be. Max Drawdown During Financial Crises
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