goes down even ten percent? A complete failure resulting in the investor being in debt to the firm with whom they conducted business (Simonson). That problem is exactly what caused the major market failure of 1929. The initial panic in 1929 carried the market some fifty percent lower and back to preboom levels. The slow grinding misery of the longest depression in the nation's history worked the market ninety percent below its 1929 highs by 1932 (Sharp 210). The market only fully recovered after the start of Word War II. This was not a good time in America, but there were a few good things that came out of it. One is that we have learned from our mistakes, and will hopefully not make the same mistake twice. The other prosperous idea was invented just before the crash. The smart investors knew that one must spread his holdings amongst a pool of stocks, just like the old phrase about never keeping all your eggs in one basket. They also knew that the riskier stocks gave far greater returns than the safer ones (Blume 95). These ideas paved the way for the invention of the first mutual fund, created in 1924. This allowed people to invest in one fund, but still spread their money over a wide variety of stocks, thereby creating a net to fall back on. This was one idea that has survived until today and shows no sign of stopping. This notion helped lead the way for the prosperity that was to come. The next twenty years was a time of great prosperity due to low inflation rates and inheritance taxes (Simonson). However, the 70's brought about a whole new era. The economy had grown too fast, causing ten percent inflation. This caused stocks to tumble. Real estate and fixed income became the prominent assets. From the 80's on, the market has enjoyed many years of prosperity, with the 90's being the decade of largest market growth. However, none of it would have been possible if it weren't for the lessons learned in the 1920's (Brown 90-107). Le...
