I just realized that many people still don’t understand what a bubble is. In fact, it’s quite an important issue for anyone who wants to invest. A bubble burst is a situation where asset prices surge irrationally—beyond their true value—until they suddenly collapse.

It’s clear that when a bubble forms, it often starts with something that looks like a great opportunity, such as new technology, low interest rates, or simply a favorable economic atmosphere. Investors see prices rising and rush in, afraid of missing out. The more people enter, the higher the prices go. It’s a cycle that keeps drawing more and more people in.

I remember the Tom Yum Goong crisis in 1997 as a very good example of this. At the time, Thailand’s real estate market was booming. Investors saw profit opportunities, and foreign money flowed in. But when the Thai baht was devalued on July 2, 1997, everything fell apart. Foreign-currency-denominated debt skyrocketed, real estate prices dropped, and investors who had borrowed heavily couldn’t repay their loans. The bubble officially burst.

You can also look at the subprime mortgage crisis in 2008. It’s the same kind of story. Banks approved loans without strict standards. People who couldn’t afford to repay borrowed money to buy houses—not to live in, but to speculate. House prices soared, and financial instruments tied to these loans became popular. But when borrowers began defaulting, the entire system collapsed. Global bad debt reached 15,000 million dollars.

Most importantly, what is a bubble? It’s caused by human behavior. We are a herd. We follow each other, one after another. When we see others making profits, we want to do the same. No one wants to think about what happens when the bubble bursts. While the bubble is still inflating, everyone believes prices will keep rising.

There are five fairly clear stages. First is the movement of capital—something new and exciting comes along. Then money flows in, prices rise, and people start viewing the world through overly optimistic lenses. The excitement becomes intense. Everyone believes they’ll get rich. And then some investors begin selling to lock in profits, while others keep holding because they believe prices will rise further. But once the numbers start to fall, panic sets in. Everyone tries to sell immediately, prices drop rapidly, and the bubble bursts ends.

For someone like me, I try to keep myself safe at all times. First, I ask myself why I’m investing—am I afraid of missing out, or do I truly understand the asset? If it’s the former, I could be part of the problem. So I try to diversify my portfolio, not put everything into a single type of asset, and I limit speculation. If I see warning signs, I reduce my risk.

Another good approach is to invest gradually, not put all the money in at once. This helps me avoid buying when the bubble is at its peak. I also try to keep some cash on hand to take advantage when the bubble bursts, or as a safety net if the market drops. Most importantly, I need to understand the market, follow information, and analyze before making decisions.

In the end, what is a bubble? It’s a test of investors’ patience and mental discipline. It happens again and again throughout history, and it will happen again. So being well prepared, understanding the risks, and not letting emotions control our decisions—these are what will help us make it through the storm.