Luckily, many of us have not experienced a stock market crash in our lifetime. It’s an unfortunate occurrence that wealth management firms try to help wealthy people plan for. We’ve all heard about the stock market crash in 1929, but do we really understand what happened?
What made it happen? The stock market crash in 1929 occurred because of panic. Essentially, people totally freaked out because what had been a successful “bull” market started to decrease. Many people started selling their shares just to make sure that they weren’t in their possession. The rapid selling quickly decreased the value of many stocks, thus causing the Dow Jones to drop 50% in one day.
Now, one thing that most people don’t realize is that stock market crashes don’t just happen for absolutely no good reason. Usually a combination of irresponsible stock ownership, an already unsteady economy, and years of companies just barely getting by increases the potential for one of these events to occur.
What happened to companies and investors? Companies had to scramble to try and recover quickly. Needless to say, that didn’t happen as quickly as people would have liked. Investors lost literally hundreds and thousands of dollars. People were evicted from homes, had their savings accounts totally wiped out, and were left with nothing because they’d banked too much on the success of the stock market.
After the initial crash, it takes people willing to take a risk in order to get things going again. The over-inflation of stocks that occurs prior to a crash results in some decent bargains for various stocks. If people are cautious, but still take the risk in order to help the economy get back to its feet. Usually if enough people get involved in this, there actually is some profit to be made for those willing to take the risk.