Causes, Effects And How To Protect Yourself Due To Stock Market Crash

A stock market crash is observed when the market index and its properties drop below certain set average parameters day in day out. It could be attributed to poor economic activities, or natural occurrences, or other factors, as it is being observed in the present year 2020. The indexes used in measuring the stock market performance are the NASDAQ, the DOW Jones Industrial Average, and the Standard & Poor’s 500. Regarding these measuring factors, the market crashes if the trading activities have fallen beyond the three average standards, resulting in economic downtime.

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The crash is much more deadly and so hard for recovery in the stock market, more than the activities associated with recovery. highlighted that if the market surfers a consistent fall of about 10% from previous year performances, the bull market has undergone correction for the last forty years. Although some investors always like to welcome such aspects of the market, in which they believe it is a self-healing sector of the market for it to rise again from the pullbacks. Besides, the crash could be favorable to some mini set of companies, individuals, or organizations; however, the post effect of the fall is brutal.

Causes Of Market Fall

To put it in a simple way, market crashes are observed through the panic sales of stock in the market. Panic sellers are the major cause of the market fall; however, the cause of the panic selling could be directed to the world pandemic, which has a ravaging effect on humans. For instance, the market crash which occurred in the year 2008 was when the Dow fell measuring point fell to about 777 points, which is quite bad for the market. It was considered to be one of the largest falls in the stock market, resulting in the panic caused by the US congress’s failure to approve the bank bailout. It was envisaged by the panicked investors that many more banks could go bankrupt, causing a more detrimental economic crisis.

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Effect Of The Stock Market Crashes

Obviously, there are no causes without effects, and there is no effect without consequences, while the market crash has its causes, there are also a lot of effects associated with the crash. Crashes observed in the market can lead to a bear market, and this occurs when the market has fallen pass the 10% correction. If a total decline of about 20% is observed in the market, the crash could cause a recession for countries around the world.

What You Should Avoid During The Crash

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A lot of organizations and businesses are going to wake up to a selling moment in their business stock. More so, individual investors would decide to sell off their stock; however, you should not be tempted to sell-off during the market fall. It could be attributed to trying to catch a falling knife, meaning you might end up selling the stock at the lowest price ever. Besides, to understand what must be done during market fall, buying of gold on would serve as an investment means for you, yielding a netter profit when the market recovers.

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