Having witnessed repeated bubble bursts throughout market history, it truly helps people understand the real risks of investing.

The fundamental idea is that when the price of an asset skyrockets and diverges from its true value—whether stocks, real estate, or even cryptocurrencies—people rush in because they fear missing out. This bubble crisis occurs when speculative behavior expands beyond limits.

Historical examples are clear. The 2008 subprime mortgage crisis started with relaxed lending for housing. People borrowed excessively to speculate on rising home prices. When borrowers began defaulting, the entire system collapsed. Financial instruments tied to these loans spread risk worldwide. Total bad debt exceeded $15 billion. Similarly, Thailand’s 1997 Asian financial crisis was caused by high interest rates, yet the real estate market was still booming. When the baht was devalued, the bubble burst immediately.

Multiple factors drive bubble crises: low interest rates encourage borrowing, new technology attracts investment, asset shortages push prices higher. But the real driver is investor psychology. Herd mentality causes people to think irrationally. Cognitive biases lead individuals to ignore warning signs. Everyone believes prices will keep rising until they can’t anymore.

Bubble bursts typically go through five stages. First is the shift when something exciting new emerges. Then the uptrend as capital floods in. Excitement follows. People become overly optimistic. Prices reach unreasonable levels until some start selling to lock in profits. Finally, panic sets in when everyone realizes what’s happening.

To protect yourself, review your objectives before investing. Invest out of genuine analysis, not just fear of missing out. Diversify your portfolio. Don’t invest all your money at once; use dollar-cost averaging instead. Keep enough cash on hand. Most importantly, study the market thoroughly.

In reality, bubble bursts are part of the market cycle—no one can avoid them. But those who prepare and understand the market can mitigate risks. I believe education and diversification are the best tools we have. When you sense a bubble forming, it’s wise to limit exposure to speculative assets and wait for better opportunities when the market adjusts.