As I'm starting on my investing journey (got all debt paid off, except mortgage - thanks to MMM!). I'm still in my learning phase for this stuff and still figuring out my risk tolerance.
Here's my zombie apocalypse question - people talk about managing risk with regard to investing in the stock market. It seems like there are 2 separate mentalities with regard to investing in stocks.
1) Stocks take a downturn, Yay! Stocks are on sale! Buy more.
2) Stocks take a downturn, Oh no Stagflation/Ubercrash/ZombieApocalypse is here, there goes all my money.
These seem to be correlated to if you are still working a regular job, which would tend to align with worldview 1, vs living off your investments, which would align with position 2. Is that correct?
Anyway, I find I tend to align pretty strongly with view 1. But I want to get a better understanding of the ideas behind view 2. The main idea seems to be that by investing in other areas besides the stock market, that you'll hedge your bets against complete meltdown.
OK, here's my main question. If we really do get into a complete stock market melt down situation, doesn't that spill over into ANY other asset, no matter how diversified? For example, real estate. If the market completely tanks (and I mean, really, really tanks, not these piddly 13% and 20% drops, but 50% or more), that seem like it would crash everything else too, including real estate.
If that's correct, then there's really no way to hedge against that, is there? What am I missing?