The bubble bursts—that’s the image that makes investors’ hair stand on end. I’ve seen this happen many times throughout history, and every time it occurs, the damage is never small.

Where does it start? Very simply. When the price of an asset—whether stocks, real estate, or even digital currencies—rises far beyond what it should be, speculators and alert investors rush in, afraid they’ll miss out. Then prices keep climbing higher and higher, like a balloon that’s been inflated too much.

I remember that in 2008, the subprime crisis in the United States happened for the same reason. Mortgage loans were approved for people who couldn’t afford to repay them. Investors saw an opportunity to profit and flocked in. Financial instruments tied to these loans became top-selling products. Home prices surged, and everyone thought they would keep going up endlessly.

Then the unexpected happened. Borrowers began to default, the entire system collapsed, and the bubble burst with a loud bang. Global losses from bad debt reached $15,000 million.

In Thailand, I also think of the Tom Yum Goong crisis in 1997. The situation was very similar. Interest rates were high, foreign investors poured in, and the real estate market boomed. Everyone thought prices would keep rising, and then the Thai baht was devalued on July 2, 1997. The bubble burst. The value of real estate fell sharply. Investors who had borrowed large amounts of money couldn’t repay their debts, and the country’s economy sank into a severe downturn.

A bubble burst isn’t only something that happens in the stock market. It can happen anywhere—stock markets, real estate, commodities like gold or oil, and even currencies, both traditional and digital. Anything that has a price can turn into a bubble.

Why does it happen? There are many factors. Low interest rates make it easy to borrow. New technology excites investors. Scarcity of assets pushes prices higher. But the most important thing is human behavior: fear of missing out, excessive confidence, and herd mentality that makes everyone rush in like a flock of sheep.

I’ve noticed that there are five stages in the formation of a bubble. First, something new and exciting arrives. Second, large amounts of capital flood in, and prices start to rise sharply. Third, investors become excessively optimistic—everyone thinks prices will keep going up. Fourth, some players realize the price is too high and start selling. Fifth, everyone sees that the bubble has burst, leading to panic selling and a rapid drop in prices.

What’s worrying is that when the bubble bursts, no one is prepared. Everyone tries to get out of the market at the same time, and prices fall rapidly. Many investors lose a lot of money.

So what should we do? First, you need to understand why you’re investing. Are you investing based on solid analysis, or because you’re afraid of missing out? If it’s the latter, stop immediately.

Second, diversify your risk. Don’t put all your money into a single asset. If that asset collapses, you’ll lose everything.

Third, limit speculation. If you suspect a bubble is forming, don’t go speculate in highly volatile assets, because they fall fastest when the bubble bursts.

Fourth, invest gradually. Don’t put all your money in at once. Invest in parts over time. This helps you avoid buying at the peak of the bubble.

Fifth, keep cash on hand. When the bubble bursts, prices drop quickly, and people who have cash can buy good assets at lower prices.

Sixth, and most importantly, learn about the market. Follow information and analyze before investing. Knowledge is the best protection against a bubble bursting.

In summary, bubble bursts are something that happens again and again. It comes from human behavior more than from the market itself. Prices rise because people believe they’ll keep rising, and when reality shows up, everyone tries to exit. Prices fall, and the bubble bursts. If you understand this, you can protect yourself.