Skip to main content

What is a Stock Market Crash? What is Bear Market?

What is a Stock Market Crash?

A Stock Market Crash is a doubled-digit fall of stocks and eventually resulting in Indices' fall due to fear of the economic situation getting weak. This fear causes panic among investors so they start selling their holdings which crashes the market. Crashes make an impact on the economy. In stock market crashes significant amount of wealth is abolished. In stock prices faces huge fall(s) in a day or days like the one seen in recent times like the COVID - 19  Stock Market Crash, Sensex on 23 March 2021 saw a fall of 3,934 points(13.15%), and Nifty 50 fell 1,135 points(12.98%), Indices in these days saw huge falls because o which they ended at their lowest levels since 2016. But in less than 8 Months markets recovered.

COVID-19 Market Crash

COVID - 19 Stock Market Crash can be said as one of the biggest stock market crashes in history. Indian Incides(mainly Nifty 50 and Sensex) fell about 33% - 35%. 41 lakh in youth in India lost jobs. The unemployment rate surged to 37.9% due to COVID. Out of these most of the people were from Agriculture and Construction Sector. India approximately lost 23.9% in GDP(Gross Domestic Product) in the first quarter of 2021. Markets recovered very quickly and stocks and indices gave handsome returns. The Real Estate, Construction, Hospitality, and Entertainment sectors were hit hard due to COVID as they were not in operations. Healthcare, FMCG, and IT(Information Technology) can be said as winner sectors as they were in operations. Panic was created among investors due to fear of closing of operations, weakening of the economic situation.

2008 US Financial Crises

Before 2006 Real Estate prices were rising and touching the sky but 2006 saw the first fall in Real Estate prices in the decade. Price rise happened due to more number of buyers in Real Estate, and they were financed by banks. It's not the problem, the problem here is that financial institutions were financing the buyers. Due to the allowance of banks to invest in derivatives related to housing because of some deregularities in the system. Investing in derivatives allowed them to make more profits which lead them to give unsecured loans to customers. Loans were given in huge amounts and were even given without seeing the capability of the borrower to pay the loan. Loans were given even 100% of the amount of the real estate. But when banks realized their losses and stopped lending money to each other. So when the borrowers defaulted on their house loans, the banks put them on sale and due to a huge number of real estate properties on sale the real estate market crashed. After decades of the Great Depression, 1929 such a huge market crash took place.





Frequently Asked Questions:

How to avoid loss of money during the crash?

The biggest problem we face is that seeing our holdings in red and the problem here is our temptation to sell our holdings So first of all control your temptation to sell your holding during market crashes, during market crashes panic will be created among investors but we don't have to be a part of this panic and control our emotions.

Now the question arises what to do during a market crash to earn handsome returns?

There is nothing complex to do during market crashes it's as simple as investing and holding your current holdings. Yes, it's just that you need to pick quality companies during a crash and just to hold your current holdings

Why crashes are the best time to invest? 

Crashes always seem to be the best opportunity for long-term investors. Crashes are the best time to invest as quality companies are available at reasonable prices.

Will crashes like 2008 and 2020 can occur again?

It is nearly impossible to predict that crashes like 2020 and 2008 can occur again, for most of us. We always hear predictions by different people about market crashes that when can market crash. But we should avoid watching the news much during crashes.







Labels:

Comments

Post a Comment

Popular posts from this blog

How to Save Money? for Students

 How to Save Money? for Students For students how to save money has always been a question and not knowing some ways to save money can let us go out of cash. So, to avoid going out of cash you can use some of this way to save some bucks. →Make a budget Guys, sometimes we spend a lot of money than we should and to avoid that extra spending we should make a monthly budget of our expenses which would help you out in figuring out that for what thing how much we need to spend. You can simply just allocate your funds for different purposes and before allocation guys start investing b'cause investing early is more important than investing more. And to simplify making a budget there are various tools available on the Internet which you can use to make your budget and you can even use tools that can track your spending and notify you when you spend more than your budget. The budget also helps you to take a track record of your income and your expenses. And yes do not forget to write or note...
Post a Comment
Read more

What is REIT(Real Estate Investment Trust)? Should you Invest in It?

What is REIT(Real Estate Investment Trust)? REIT works as mutual funds for stocks in which a firm takes money from investors and from that money they buy real estate properties and manages investors' money. REITs buy properties and lease the properties and collect the rent. Collected rent is distributed among shareholders as dividends. All the small and big investors can buy REITs. The minimum investment amount in REITs is ₹50,000(approx), the amount may vary from REIT to REIT. REITs have also divided their assets into parts called units similar to mutual funds. Properties bought by REITs can be any segment healthcare, apartments, etc. REITs give investors to be part of highly valued real estate properties. Rates of properties are extensively high in cities like Hyderabad, Mumbai, Delhi, etc. these cities being expensive get out of reach of common people so REITs help common investors excess to these properties and become a part of it and take advantage of the growth of real estate...
Post a Comment
Read more

Reliance Industries Ltd. - Company Analysis (Part-6)

Continued... 6) Oil and Gas Exploration & Production Source Reliance Industries Ltd. Annual Report 2019-20 Financials The company saw a drop in revenue of 35.8% from 5005 in FY 2018-19 to 3211 in FY 2019-20. The company saw a drop in EBITDA of 78.5% from 1642 in FY 2018-19 to 353 in FY 2019-20. This drop in revenue and EBITDA were as volumes from domestic upstream fields and US shale was lower because of natural decline and slowdown of in development activity. For the year, domestic production (RIL share) was at 38.8 BCFe, down 34.1% y-o-y and in US Shale, the business was 80.4 BCFe, down 14.9% y-o-y basis. RIL(Reliance Industries Ltd.) History Dhirubhai Ambani, Father of current Chairman Mukesh Ambani, returns to India in 1957 after a stint with A. Besse & Co., Aden, Yemen. He starts a yarn trading business from a small 500 sq. ft. office in Masjid Bunder, Mumbai, but dreams of establishing India’s largest company. In 1977 Reliance Textile Industries went public with its I...
Post a Comment
Read more