How You Can Protect Yourself Before The Next Stock Bubble Bursts

Throughout history, bubbles have formed in stocks, real estate and even tulip markets. Indeed, financial history keeps repeating itself. Bubbles form, grow and then burst with disastrous consequences over and over again.

Investors who are participating in the market run-up typically believe that if anything goes wrong, they can be safely one of the first people out the door. But, since bubbles are fueled by psychology—the fear of missing out—and also greed, getting out at the right time is a challenging maneuver that few succeed at.

There’s an old saying in the stock market, bull markets climbing higher take the stairs, but bear markets that are tanking take the elevator down. When stocks plunge, panic selling drives prices down fast. That makes it hard to get out.

The outcome of a bubble is always the same. Bubbles end badly, with financial losses far exceeding what investors thought could be possible.

Why are some experts sounding the alarm bell right now on stocks? Simply put, market valuations are historically overpriced and overstretched.

At the recent S&P 500 peak, Nobel prize winning economist Robert Shiller’s price/earnings ratio (CAPE) was the second highest ever—going all the way back to 1870.

These are the type of signals that occurred before major stock market plunges, which saw the market dive 50% or more in 1973-1974, 2000-2002 and 2007-2009.

If you have a $1 million stock portfolio—how would you feel if that were cut in half to $500,000 by December 2025?

There is a way that you can decrease your risk before the next bubble bursts.

Increase your allocation to gold right now.

Book some of those profits in your stock market portfolio and use those proceeds to purchase a tangible asset like gold or silver.

Precious metals act as an insurance policy, a hedge against equity market declines and as a vehicle to protect and grow wealth. This paid off for gold investors after the 2008 global financial crisis when gold went from $700 to $1,900 an ounce.

Gold and silver have stood the test of time, providing people for thousands of years with a store of value that not only protects and preserves wealth, but helps to grow it. The great gold rally is far from over. Gold broke records last year and is expected to set new records in 2025.

How much is gold enough? That is a personal question based on your risk tolerance level and there are a range of answers:

• Billionaire investor Ray Dalio recommends investors to own up to 15% of their wealth in gold saying: “if you don’t own gold, you know neither history or economics.”
• Research from the well-respected CPM Group stated that over the past 50 years, the best return of a portfolio including stocks, bonds, and gold was for portfolios that had around 25% – 30% of their value in gold.

As the calendar flips to 2025, the stock market rally is frothy and living on fumes. If you take action now, you can protect your wealth before the next stock market bubble bursts. Now’s the time to buy if you’ve been waiting to increase your allocation to gold, with $3,000 an ounce as the next big target on the upside.

Gold’s role as currency and as an asset to protect, preserve and grow your wealth has lasted for centuries and shows no signs of losing its appeal. If you have been thinking about increasing your allocation to gold, there’s never been a better time. It’s easy to increase your wealth protection, why not do it today? When the stock market begins to tank, you’ll be glad you did.

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