Stock Market Crashes- Past Turns for Today’s Lessons

Every history has some lesson, which we all need to share & remember to protect us from any mishappening circumstances. So well, it considers the Stock Market Crashes.

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This article will tell you about the different stock market crashes worldwide. You will know about the prominence of these activities as well.

Let’s start this from the common question everyone asked by everyone..... 

What Is Stock Market Crash?

When the prices of the stocks suddenly fall then, it leads to the stock market crash.

It is a dramatic market crash where the prices decline after the cross-section of the trade market. This will lead to the loss of wealth.

The crashes happen for several reasons, but the major causes are panic selling and economic factors.

Causes of Stock Market Crashes

There are several reasons for the Stock Market Crash few of the causes we will discuss over here.

· Speculation

The first reasons are the market crashes over the Speculative motive of the traders.

This led to the famous stock market crash of 1929 because of the speculative bubbles, which promoted the decline of share prices, and further, all was history.

· Higher Inflation and Interest Rate

The Stock market crashes due to higher interest rates and stock markets. A higher interest rate is the negative catalyst in the trading house.

Higher inflation and interest rate put downward efforts on the stock market dividend yield. So it will refer to the stock market more effortlessly decline.

· Governmental Possibility

Going through the bumpy roads ahead is always the best part that leads to the market being more absorbent for the prices.

It shows in the situation of Dow Jones Shares in 2001 when the terrorist attack on the US.

· Tax Variations

The Stock Market is tackling for many reasons, but this cause is the well-occupied sessions that lead to the more straightforward market crash.

We all know that the tax rate is affecting the market very badly. It comes with lower paychecks for the workers and higher for the employee.

We can say that Stock Market Crash Prediction is also depending on those pointers. Rest is counting the prevention which holds the spacing.

Prevention in Stock Market

Prevention of everything is essential; you need to analyses the best channels for protecting your wealth.

Check out some of the preventions as follows:

· Prepare Your Mindset

Diversifying your financial portfolio to lessen the impact of the crash and investing in low-risk options is a couple of ways to get ready for a sell-off.

Being completely ready in advance is one of the best ways to stop the stock market crisis from impacting your finances.

· Set Your Stop Loss Target

When you purchase a company's stock, set a stop loss objective quickly. If the stock price drops due to a market crash, you will be able to do this to lessen your capital loss.

Although there is no ideal stop loss, it would be a good idea to set your investment's aim below 10% to 15% of your purchase price.

· Don't Depend On The Market.

In uncertain times, it is best to avoid opening new positions when you expect a market sell-off.

Refraining from making any new investment decisions or ideas and instead keeping a close eye on the situation is a much wiser course of action.

In this manner, there is no risk that the stock market meltdown will impact you. Instead, use a buy-and-hold strategy for some gains after the dust has settled.

· Invest in Defensive Stocks

To protect your investment portfolio from a stock market crash, buying defensive stocks is one of the most common tactics.

Defensive stocks are made up of well-established businesses that produce essential goods and services for consumers.

Since their products or services are almost always in demand, these businesses typically remain profitable and financially stable even during difficult times.

Indian Stock Market Crash

1865: In 1861, Increase in demand for cotton led to a boost in the Stock prices of the Cotton Company.

After the Civil American War ended in April 1865, the demand for cotton decreased, leading to the stock market crash.

1992: Harshad Mehta Scam led to the stock market fall by more than 50%.

Sensex tanked from around 2000 points to 2500 points.

2008: On Jan 21, 2008, Sensex dropped by 1408 points. Also known as Black Monday.

Reasons:

· The decline in the Interest Rate

· Fluctuating Commodity Markets

· Recession Fear

2015: Market Fell Down 1624 Points, Due to Chinese Yuan Devaluation.

2016: By Feb 2016, the market fell by 26% & then, Due to Demonetization, it fell again by 6%.

2020: As we all know, due to COVID 19, WHO Declared a dropped of 42,273 points to 28288 points.