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Newspage RawSource: Scott Gallacher, Rowley Turton

AI bubble fears: Does the 2008 financial crisis demonstrate the dangers of trying to time the market?

ended 05. November 2026

Leicester-based independent financial advisers Rowley Turton have revisited historical investment performance data covering the 2008 financial crisis.

Using five risk-rated benchmarks constructed from combinations of established Investment Association fund sectors, rather than selected individual funds, the findings are revealing.

Between August 2007 and March 2009, £1 million in the highest-risk benchmark fell to approximately £653,000, compared with £807,000 in the lowest-risk benchmark.

Yet over ten years from July 2007, the higher-risk benchmark grew to £1.77 million, compared with £1.45 million for the lower-risk benchmark.

Despite suffering substantially greater losses during the crash, the higher-risk benchmark finished approximately £329,000 ahead.

These illustrative benchmarks are based on historical sector returns, not actual portfolio performance. Past performance is not a reliable indicator of future results. Two FE Analytics charts are available to journalists.

Questions for Newspagers

  1. Are concerns about an AI bubble encouraging investors to make potentially damaging short-term decisions?
  2. Is attempting to time the market more dangerous than remaining invested through a significant correction?
  3. Does the experience of the 2008 financial crisis demonstrate why higher-risk investments can still make sense for long-term investors?
  4. How should investors distinguish between market volatility they can tolerate and taking more risk than they can afford?
  5. Are today's AI valuations comparable to previous market bubbles, or are there important differences?

4 responses from the Newspage community

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Scott GallacherVerified
Director at Rowley Turton
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Clients often tell me they chose me because of my brutal honesty and clear explanations. At the outset, I feel it's more important to understand what you could lose than what you might gain.

I explain potential losses in pounds, not just percentages. A 25% fall might not sound frightening, but losing £250,000 on a £1m portfolio brings the risk into focus.

Despite this conservative approach, I firmly believe investing is key to long-term financial planning. The important thing is having the risk tolerance, timescale and resources to weather market storms.

Our analysis of the 2008 crash shows that higher-risk benchmarks suffered much larger falls, yet delivered better returns over the following decade. Past performance is no guarantee of future returns.

Whether AI shares are in a bubble remains to be seen. But even correctly predicting a crash isn't enough. Unless you also get your reinvestment timing right, trying to avoid a downturn could come at a considerable long-term cost.
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Dave HuggettVerified
Founder at Lucid Foreign Exchange
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AI bubble worries are pushing some investors to sell, but after the fall has already happened, which turns a temporary loss into a permanent one and can be the most damaging decision available.

Timing the market means being right twice, once on the way out and again on the way back in, and most people miss the return so staying invested through a correction is usually the cheaper mistake, although nobody ever knows with 100% certainty.

The 2008 crisis teaches us a lot, but mainly when the investor has the time and the nerve to recover from the fall, because higher risk is paid for with bigger drops along the way.

Tolerable volatility is a fall you can sit through without selling, while too much risk is a fall that would force you to sell because you need the money.

Every bubble looks obvious afterwards and nobody can call the timing with any certainty, so the practical approach is a spread of investments sized to what you can afford to lose.
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Paul DenleyVerified
CEO at Oakham Wealth Management
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Fears of an AI bubble may tempt investors to retreat into cash, but getting out is only half the problem. You also have to know when to get back in. Missing the recovery can be more damaging than enduring the correction.

The lesson from 2008 is not that investors should take maximum risk, but that time horizon matters. Volatility is the price of admission for higher long term returns, provided investors can afford to stay invested.

Today's AI valuations are stretched, but unlike the dotcom era, many leading companies generate substantial profits and cash flow. The greater concern is whether extraordinary expectations can be met.

Risk tolerance is both financial and psychological. A portfolio that keeps you awake at night is probably taking too much risk, however attractive its theoretical returns.
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David BelleVerified
Founder and Trader at Fink Money
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I'd argue there is a protfolio composition problem if people are considerably worried about an AI bubble.

In short, it means they're 'too long' AI.

If you look at RSP, the equal weight SPX ETF, that's actually made a new all time high and opening higher in pre market.

The issue with simply staying long something like the SPX, which is predominantly AI, is that you increase the volatility profile of your portfolio.

Yes, you make more on the upside, but the concentration to one theme on the downside hits similarly, with different market dynamics at play (faster leverage degrossing, trend followers willing to flip short etc).

So the answer is 'it depends'. Are you willing to get exposure to higher volatility but perhaps greater drawdowns or are you wanting lower vol but perhaps more stability?

Neither is inherently more risky which is where British investors get confused, since volatility is not risk, it's just a choice to be made before you buy something.