Have a read of Jeremy Grantham’s book. Seeing bubbles is reasonably easy. Forecasting when they pop and when to get out is very hard. For example GMO as at the end of April were forecasting through the bubble that returns for large US equities would be negative over the next seven years. But since then the market has gone up by over 30%. It could pop any day, or could grow for two more years. Advice is to diversify your investments and make sure you avoid systemic risks. Read books by value investors.

Forge a sell-all trigger and test it several times with just a minimum level transaction. Worst case is you sell a day or two ahead of the full pop.

Not financial advice, but: Honestly it’s pretty hard and I wouldn’t recommend it. Shorting stocks and getting into bonds / default swaps but the system is broadly rigged against small players doing well here. Ie in the Big Short see everything that was needed for two guys to bet with their own money.

It’s likely to be bumpy for all but stay the course with diversified strategy. The .com bust and 2008 are just blips and cheap buying opportunities for most folks with diversified portfolios and index funds. We’ll likely see similar messy markets for a while but the world will eventually recover and move on.

The ones that get truly wiped out are those with a lot of paper wealth now that implodes, but have little liquid wealth. These types go from “super rich” to can’t pay their bills almost overnight. Cash is king for times like those ahead so if you don’t have a lot of cash on hand, now is the time to secure that if you can.

Be careful if you expect a dot com fallout - that was retail investor driven and took a long time to unwind as people sat through painful drops. Ai is much more of a private investment bubble. AI remains useful. What is likely to go away (and all at once) is investment and free rides/discounts.

So I expect more of a sobering process for AI companies rather than a blowup, simply because they all still will have cash in the bank and some have actual products with clients that make use of them.

Not financial advice.

The most straightforward thing to do that would have saved you in 2008, 2000 (and even 1929 to some extent), is to limit debt exposure and have enough cash sitting around so you don't have to sell your positions.

People who held (and invested more during the low points) did just fine. The people who got hurt the most were in a position where they had to sell (their 401k, their house etc) for a loss.

When a crash happens, it's a buyers market. In some ways it's a transfer of wealth to the top.

The problem is, timing the crash is impossible. Inflation chews into your cash portfolio, that could've been used to grow wealth.

Edit

There are of course more complex financial instruments. And they're interesting, but essentially amount to gambling. Holding short positions on sectors/companies is a zero sum game. As a retailer, you're betting against firms that have a lot of money and insider knowledge. Even if the thesis is correct, it has to be correct at the right moment.

I don't think there's a good way for individual investors to position themselves against economy-wide investment misallocation. As The Big Short also covered, any profitable short position is going to require making a risky bet about when the bubble will pop, and when things get chaotic there's no guarantee that instruments which "should" be correlated to the thesis will actually remain so. You can:

* identify a bad AI stock at $100 today

* produce an ironclad 100% guaranteed proof the company's valuation will drop below $50 by the end of 2028

* buy a bunch of long-dated puts with a break-even of $75

* see the AI investment bubble visibly falling apart in let's say March 2027

and you still lose if OpenAI acquihires the team at $80 in an attempt to prop things up.