Will Stocks Crash Again?
For some, images of the stock market crash may look like something that has been snatched from a horror movie. It’s never something that you want to relive again. Even in your mind.
The year was 2008.
The market crash started with the Dow’s point drop plunge on Sept 29, 2008. It was the most colossal point drop in the New York Stock Exchange History.
When Covid-19 came out of the blue in 2020, stock investors have come up against ten years worth of unpredictability stuffed to the gills in one year. The uncertainty that the pandemic brought was unequaled. During Q1, it plunged to over 34 percent and it ended the year higher.
Simply put, the market has never been that crazy, where indexes experienced a bit of some rough tossing and where the market held the highest volatility reading on record.
Alas, another new year does not automatically indicate the culmination of an out of the ordinary kind of volatility. And doomsayers are telling everyone to buckle up and brace themselves for another bumpy ride or even worse, Heaven forbid, another crash.
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Table of Contents
How does a stock market crash?
Obviously, prices must spiral down. Now, what if the stocks increase and the value of money drops?
Is that considered a crash?
If the value of money decreases but the market soars a bit, is that considered bullish?
Some people would maintain in opposition to the proposition that it is the liquidity of the Federal Reserve that has allowed the stock market to keep its head above the water. Some people say that in this bid to keep the U.S. economy from collapsing, it has pumped up the values of the stock assets to absurd levels.
The Americans have heard it straight from the horses’ mouth — the Feds were staunchly dedicated to providing support to the economy and to protecting it from the anti-Covid measures, for as long as and for as much as needed. Plainly enough, this suggested that it’s going to be long-term.
When exactly the stock market will crash again —that is beyond anybody’s prediction.
But if the question is — Will the stock market crash again?
Then the quick answer to that is simply, Yes.
The market will crash because that’s what the market does every now and then. It’s a war between avarice and fright. When materialism or greed is on top, the market takes off, and when the fright is on top, the market plunges.
If the two forces are fairly balanced then the market’s movements will be well-kept and serene. There will be no unpredictably erratic behavior. Sometimes, when fright gets the better of the investors’ feelings, the market crashes.
The fact that the stock market will crash again sooner or later is certain. If you’re ill at ease about that thought. You are not alone. However, that anxiety is an indication that you are not prepped up and ready to manage the stock market jolt on your finances.
However, with the right plan of action, a proper financial structure, and with a correct perspective in place, a stock market crash is not something that should get you overwrought. As long as private enterprise or capitalism remains unbroken, stock market crashes bring about a resurgence or a new beginning. The basis for investors is to know that’s how the market works and be primed ahead.
No matter how doomsayers cast doom and gloom, one thing is sure — your divvies are still getting paid. Even if the prices of the socks are based on the company’s potential prospects, firms usually pay their stockholders dividends based on the cash they are making.
If a firm maintains and pays dividends even as the price of the stock drops, that is an indication that the management believes that these challenges are short-term and the company’s center is pretty solid. Furthermore, dividends usually come in the form of money — cold cash.
That money is something you can use to pay some of your costs, increase your funds for an emergency or you can invest that amount right back in the market. When the stock market is bearish, dividends are a substantial source of cash as they symbolize actual money right in your account that you didn’t have to put on sale.
When the stock market goes bear, remember two important words — Warren Buffet. Buffet, as you probably already know, is one of the most successful investors the world has ever known. As of December 2020, he ranks as the fourth richest person in the world.
Now, what is his strategy when the market is bearish? It’s actually simple and straightforward — and it’s one that we can go after. If the company’s stock prices drop, get excited and start buying. As long as the operations are solid and its prospects are good, a market crash can give you the golden opportunity to purchase more stocks in the business.
Remember your stocks are ownership stakes in companies. If the market crashes, prices are down, go buy more.
That’s right, the stock market is constantly see-sawing. If your finances are built around the expectation that share can only soar, then you should panic over the next stock market crash.
But if you know how a market behaves and plan around those factors, then you will be in a good place when the stock market crashes. Who knows, you could come up in a way better position on the other end!
After all, as they say, when the market crashes, it’s time for rebirth.
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