A global market crash can shake investor confidence and cause a ripple effect across your portfolio. It can also present opportunities. It’s important to stay calm during market volatility and remember that a well-diversified portfolio can help you achieve your financial goals. It’s also important to avoid rash trading decisions that could have long-term consequences, like selling your stocks during a market downturn.
A major stock market crash occurs when a significant portion of the stock market falls in value within a short period of time. The cause is often due to panic selling and underlying economic factors. It can also be the result of a financial bubble, such as one that occurred in the late 1990s when investors’ excitement over tech companies drove valuations beyond what they were worth.
When the global stock market crashed in 2008, it was triggered by the collapse of the US housing market and the failure or near-failure of many financial institutions. The resulting financial crisis led to the collapse of credit markets, with banks unable to borrow money from each other and businesses hesitant to invest. Consumer confidence also plunged, and a recession set in.
As a result, many investors were caught off guard by the sudden decline of the stock market, leading to losses in their portfolios. These losses can be devastating if you’re counting on your investments to fund your retirement or other goals. But if you understand the root causes of a market crash, you can be better prepared to make wiser investment decisions when the next one hits.
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