The stock markets and other trading companies are the gateway for many investors to increase their trading businesses. It is a very lucrative way of increasing assets based on buying and selling shares and stocks. This trading market increases the profit rates of the shares to induce cash inflows both domestically and globally.
On the contrary, everything does not go smoothly or fairly even in share markets. Therefore, there are some pros and cons of the stock markets and it is crucial to educate the investors and traders. The traders and investors must be aware of the various myths of the share markets. Certain stock market bubbles that are still prevailing in the market and deceiving many individuals. This blog will talk about the most important ones:
Understanding the Concept of Asset Bubble
Asset Bubbles refer to the high rise or increase in the prices of assets at a very rapid rate without justifying the underlying reason for the hike. The high price hike creates problems for investors and traders. Thus, they sometimes suffer a huge loss and sometimes the country also faces recession due to the price spikes. The main highlight is that it disrupts the supply and demand of the economic processes.
The asset bubble had shown 5 stock market crashes globally and had made a significant impact on the global stock market.
History of 5 Biggest Stock Market Crashes
The world has seen 5 biggest stock market crashes in the history of mankind and these incidents have left an impact on the minds of investors. This also raises the questions of the security of the invested stocks and the returning profits. The 5 Biggest Stock Market Crashes are as follows:
- Japan’s Real-Estate Bubble: In the late 1980s, the Japan Real Estate Bubble first came to light, where property and stock prices skyrocketed at a very unsustainable rate. The bubble economy had surpassed the value of California concerning Tokyo, and this eventually bankrupted many bankers and other stock investors by leaving behind huge debts. The bubble had collapsed Japan’s Economy and lasted for ten long years. This is a warning for every investor in correspondence with the Indian Share Market to be careful about asset price inflation and unchecked speculations.
- Dot-Com Bubble: The Era of rapid internet expansion, and various speculative investing emerged in the late 1990. There has been a huge surge in the share prices of numerous technological companies, mainly online companies at unsustainable rates. The investors and other sectors had suffered huge financial losses and there was a wide range of business failures. The main message from the Dot-Com bubble is identifying the genuine business fundamentals and other excess trading and market speculations in the share market news.
- South-Sea Bubble: One of the most notorious financial bubbles and stock market crashes that occurred in England in the early 18th century. The South Sea had issued a monopoly to the British Government to trade with South America and had promised various lucrative returns to the following investors. Increasing enthusiasm among the investors raised the prices of the stocks and led to gradual inflation. The values did not match the actual prices and suffered a huge crash. This incident reminds us about misleading investments and transparent financial practices.
- NINJA Mortgage Loans: The incident occurred in 2008 when the US Government officials had ordered the lenders to issue loans. They had issued the loans without verifying the incomes and history of the borrowers and had given loans to No Income, No Job, and No Assets individuals. The homeownership had allured to a high rate and hiked the inflation rate of the property prices which eventually suffered the government officials. The incident reminds the unnecessary lax lending standards and offering mortgages to individuals without checking their background.
- Tulip Mania: The Netherlands faced an asset bubble in the 17th century, where the price of tulip bulbs had skyrocketed to irrational rates. The people had traded tulip bulbs at an exorbitant rate on the notion of immense future profits. In the year 1637, the tulip bulb values faced a gradual downfall. The Tulip Mania is aware of the Share market India of the market sentiments that can override the rational valuations in the markets.
Final Thoughts
The stock market crashes had shown various speculative measures about stock market investments that carefully prevent or minimise the risks and dangers of financial loss or bankruptcy. In the context of the Indian Share Market, the investors and the traders must ensure safety measures and should educate themselves about the various myths and cons of the share market.
