Halloween (scary) is coming up and with October the anniversary of the 1987 stock market crash (very scary), our thoughts are naturally turning toward fear. As the wannabe ghosts and goblins start to prepare their costumes for month's end, there are plenty of other things scaring investors the most these days. Here are five of them.

Company fraud

Most investors fear fraud at one of their companies a lot. You own a stock that does exceptionally well and are dreaming of your care-free days on the beach when — Bam! — it is revealed your investment is a fraud.

Bre-X Minerals Ltd., Bernard L. Madoff Investments Securities LLC, Sino-Forest Corp. and other scams have truly spooked investors. The problem with frauds, of course, is that they seem so good. Of course, when one is totally fabricating financial statements and investment performance, it is easy to make things look great.

Giant frauds surface every once in a while. Few can truly spot the truly devious ones (not even the regulators). Thus, portfolio diversification and extra due diligence are your only defenses against the fraud goblin.

Government failure

Iceland, Greece, New Zealand, and, maybe, the United States have all experienced moments where it looked, at one point, that their respective government would just... stop.

Because governments are huge employers and their promises are the key to a smooth, efficient economy and payment stream, any harrowing issues with government are going to be potentially devastating for investors.

The past month at our company has almost exclusively been spent on investor questions about what steps to take if the U.S. government effectively grinds to a halt because of a failure to reach an agreement on the debt ceiling.

Market crash

It's fitting on a crash anniversary that many investors lie awake at night worrying about a complete market collapse. We are told to invest for the long term, but a 22% one-day decline (as happened in 1987) certainly wipes out years, if not decades, of prior gains.

The flash crash of 2010 did nothing to alleviate any crash fears, nor did the giant month-long crash of October 2008 in the midst of the financial crisis. Crashes happen.

Of course, every crash in history has proven to be a long-term buying opportunity, but that only works if you have cash lying around. Despite what you might see on the Internet, no one can predict a crash. You might wait decades for the next one, or it might happen tomorrow. They are truly scary.

Hyperinflation/massive interest rate hikes

Students of monetary history know about the Weimer Republic: Massive currency printing led to massive inflation and a loaf of bread in 1923 cost 100-billion marks. Zimbabwe experienced the same inflation effect not that long ago, and needed to produce 100-trillion-dollar notes. In its capital Harare, 100-trillion-dollars in 2009 wouldn’t even get you a bus ticket. 

The U.S. is printing, at a minimum, US$86-billion monthly in its ongoing, perpetual stimulus program. If inflation takes hold one day — and many expect it to — the past experiences of Germany and Zimbabwe might be duplicated in North America. Gold bugs, in fact, dream of the day, rather than have nightmares about it. Most investors, however, should have it near the top of their list of fears.

Gold

Many investors, for reasons related to the above point, have loaded up on gold and gold mining company shares. But these same investors fear that, maybe, gold will just not do anything.

In prior periods, gold has had 20-year bear markets. Maybe, investors fear, something will occur in the world to prevent gold from soaring, as it is ‘supposed’ to do. They sit and look at their declining portfolios, and wonder, "Is this as good as it is going to get?

They have good reason to be scared. Gold doesn't pay interest or dividends, costs money to store and insure, and can decline sharply if interest rates spike.

Has gold peaked? I doubt it, but, nonetheless, we think gold bugs should go easy on their holdings — everything in moderation