Expert Theories on the Causes of a Stock Market Crash
Everyone knows that money cannot buy happiness; however, when you are financially stable, you might have to key to living a happy life in todays society. This is a proven fact if you read more about this article.
Having control and being certain of your life are associated with gaining literacy and financial stability. If your finances are not certain, you will most likely feel stressed out.
Imagine what it would be if this type of uncertainty prevails on a global or national scale. The year 1929, this level of uncertainty has taken place when there was a crash in the stock market. The same thing happened in the years 1987 and 2008.
Why is it possible for the stock market to crash and what are its causes? Generally, there is not one clear answer about this. Crashes in the stock market are often caused by different factors interacting with each other. Knowledge about the Great Depression alone will tell you that a crash in the stock market has serious consequences on the economy and families like lower wages and unemployment.
What are these factors that affect a stock market crash? Be sure to learn more about popular theories explaining why the stock market crashes by reading this article.
As mentioned, crashes in the stock market affect a lot of people. Be sure to read below for more about these factors causing stock market crashes.
When the economy is thriving, most people buy goods, items, and stocks with confidence. When the stock market is performing, most people would take on bigger risks. They invest with the thrill of getting more money and getting more returns of their investments. At this time, people will most likely borrow money and invest in their money on the market, accumulating their debt on bank credit. You call this practice purchasing stocks on margin. On the surface, the stock market may look strong and healthy, yet in the 1929 stock market crash, people who invested their money lost them all after selling their shares.
Once panic sets in on a worldwide scale, people tend to make decisions on a rash. Panic on a wide-scale happens when the market drops and news articles and comments by public figures are made. Fear of a stock market crash often leads to people getting out of their investments and selling their shares. A crash in the stock market happens when the situation is turned from bad to worse leading to a bigger loss.
For you to learn more about financial security and investing, always seek consultation from financial experts like a financial advisor. Avoid relying on media coverage when you can get them from a reputable source.
Political conflicts can also make the market uncertain. Wars and scandals lower growth and confidence in the market on the part of the investors. You can read more about the stock market crash causes here.