You've heard the whispers and warnings of a possible stock market bubble, and you're spooked. You just survived a big drop in your portfolio's value back in March, and you're not ready to go through it again. Is it time to cut your losses and get out, ahead of another crash?
A stock market bubble happens when investor enthusiasm drives share prices up so high that they're disconnected from underlying value. Rising share prices are great for investors in the moment. But as Barry Gibb of the Bee Gees said, "... all bubbles have a way of bursting or being deflated in the end." When a stock market bubble bursts, share prices revert to more-rational levels, and investors lose billions in short order.