Barefoot Investor Scott Pape has warned a stock market crash will happen eventually.
In his latest column, the Barefoot Investor paints a vivid picture of the moment many Australians dread.
‘You wake up and check your phone. The markets have opened, and your super is down 25 per cent, $125,000 gone, just like that – what do you do?’
Pape said he is constantly asked the same question in different ‘apocalypse scenarios’ – from a US debt default, to a global recession, to geopolitical conflict, to an AI-fuelled bubble bursting.
‘Truthfully? Every investor has their own disaster movie playing in their head.
‘The problem is you’ve created a story … and it’s almost certainly wrong.
‘I know this because every story I’ve created has been wrong too.’
Pape admitted he has made his own dire predictions in the past that failed to materialise.
Scott Pape (pictured) says it’s not a matter of if, but when the stock market will crash again
‘I was convinced Trump’s 18 per cent tariffs would skewer the world’s largest economy. Didn’t happen.
‘I thought AI was overhyped by Silicon Valley grifters and would crash. Hasn’t happened (yet).’
Despite the uncertainty and fear that often grips global markets, Pape said he remains invested by sticking to a simple philosophy.
‘My secret to investing is the same as my marriage: Low expectations and permanent paranoia.’
He expects long-term returns of around 7 per cent after inflation, avoids whatever ‘Wall Street is selling,’ and stays loyal to index funds.
He also keeps several years of living expenses in cash or fixed interest, a strategy that he said sacrifices returns but buys peace of mind.
Turning back to the hypothetical scenario of a 25 per cent superannuation wipe-out, Pape said investors should ask themselves how they would react.
‘Your answer to this question tells you everything about whether your portfolio is right for you, or a disaster waiting to happen. Does it make you want to panic and sell?
‘If so, panic early. Talk to your super fund about reducing your exposure to the markets.
‘Does it make you want to buy more shares on the cheap?
‘Then you likely need more cash sitting ready to pounce when it happens.
‘Look, the crash will come. It always does. The key to sleeping soundly is to open your eyes and live through it today.’