Stock market crash chart
provides valuable lessons for beginner stock market investing
What can 1929 crash of stock market teach you
Stock market crash chart is very valuable when you want to see what happened with stock prices during periods of great fear. There were several market crashes in last hundred years and decades.
Most known is probably 1929 crash of stock market. But is is not the only one crash in history of the stock market. There were stock market crashes already before during previous centuries. The history of stock market investing is full of periods when irrational mania happens on different markets in the world and that leads to stock market crashes.It is madness to think that crashes will not come. They will come again and again. We can expect that stock market crashes will repeat again in the future as a lot of investors are not able to learn valuable lessons that these stock market crashes provide to them. Therefore I think that passive investors but also active investors and traders should remember important stock market investing advice when looking on stock market crash charts.
1929 stock market crash graph
The most known and often mentioned crash in modern history of stock market is 1929 crash of stock market. This stock market crash in 1929 was fueled by lending and credit boom that was provided for stock market speculation. The bubble happened because many people were gambling on stock market without really knowing stock market investing basics that are needed for profitable stock market investing.Here you can see how deep stock market index sank during great depression stock market crash.
Stock market investing basics
provided by stock market crashes
1. "This time is different"It is very common to hear this sentence. Every decade after some strong boom in one of more areas of economy you will find people telling such sentence. Do not believe it. It is not different. History of stock market crashes shows us that some crashes will come again. When you will hear such sentence, evalue the area of economy to which it is pointed and then wait for bursting of the bubble . 2. The prices can go only up It is also not true. What is going up will also go down. It is correct the there are strong mid term trend moves on the market accompanied by pullbacks. But every trend will finish and change into opposite. There are also times of bear trend on the market.
3. Fear is much stronger emotion then greed Stock prices move up slowly. But when stock prices change their trend, down moves are much stronger and price move down much more quickly. 4. Diversification will not help during panic Panic moves across asset class universe. Do not expect that you will be safe with commodities when stocks will be in panic selling. There are only few safe heavens and they are also not working all the time. I would mention US 10year Treasury Bonds or German Bunds - i.e. fixed income products issues by governments of USA and Germany.
The great stock market crash of Nasdaq in 2000
5. What rise too much up will go down very quickly and a lot Just check some manias. Internet bubble moved price of Nasdaq index up during 6 months in final part of bubble during 1999 - 2000 only to erase these gains in 3 weeks. The same happened in 2008 when during 2008 panic SP500 index erased gains of last several years.
Stock market crash in 2008
The period of very low interest rates that prevailed since end of Nasdaq 2000 bubble leads to over leveraged financial sector and many of strange financial instruments. Almost free money and big leverage led to great boom of mortgage financing in USA and also in explosion of government debt in developed countries.When bubble exploded then stock market sank. Here is a stock market crash chart of SP500 market index during this period.
6. It can take long time before price will recover to pre-crash levels Sometimes there is only mini crash which last only few days of weeks and then price recovers again within few months. But it can take years to recover from big crashes and as you can see on this stock market crash chart that Nasdaq is still under 50% of his peak from 2000 bubble. And it is already more then 10 years (2011).
So what are my recommedations for handling of such situations ?
Well we are not able to predict some crashes - like Flash Crash in 2010, Natural disasters related crashes. Some can be expected like Nasdaq 2000 bubble meltdown or Subsprime crisis of 2007 - 2008.It is wise to be more active investor then buy and hold only investor. It is wise know
how to read the charts
and to
take profits
when price starting to move parabolic. It will drop down again. And if you are not able to handle your portfolios yourself then it is wise to find
some advisor
who will help you to manage your money and portfolio.
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