Do They Really Crash or is it Just a Stock Market Myth?

Do They Really Crash or is it Just a Stock Market Myth

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There are two factors that lead to a lack of profit when it comes to the stock market. One reason is the market hype disseminated by media. When a small issue gets out of control, it is given a wide coverage that leads to a lack of investor confidence. The second is herd culture. Once an investor believes all the hype and sensationalism, he would tell his colleagues and what you have is a domino effect. Sensationalism simply leads to excitability, which leads to people acting irrationally. What you must understand is that when it comes to the stock market, one must be objective since we are dealing with a science of sorts.

It is true to say that there is a sense of irrational behavior when it comes to the Australian stock market. However, the news which may cause this irrational behavior may not have a bearing on the stocks per se. However as mentioned previously press releases, mass panic, euphoria and even rumours could lead to fluctuations. The best thing to do at this point is to merely let it ride out. Giving into such reactions is not always advisable. And whichever way you look at it, remember that the stock market always booms.

In addition to this while it is true to say that depressions have taken place and stock markets have crashed, the truth you need be familiar with is that it is not an everyday occurrence. Frankly, there are enough and more risks in everyday life and investing in the stock market can be safer! Lot of people will probably remember the Great Depression that Australia went through in 1929. While it is true that this was a devastating period for all Australians, we must try and understand the reasons why this Depression took place.

There are three main reasons for this Depression. One was a dramatic fall in export prices and sales. Secondly there was a great fall in overseas loans which subsequently led to a reduction in government capital spending. Finally when the economy suffers, there was a fall in residential construction. So how often does this happen? Not often at all. And truth be told, the economy bounced back in 1932. A stock market crash is not a crash that goes on forever. What we must also bear in mind is that the politics of the country also contributed to what happened in 1929, and frankly things are far more stable now than it has ever been.

Moreover, even if a Depression is to come up in the near future, countries are far more prepared to face it. Case in point would be the recession of 2008. Australia hardly suffered and neither did the stock market. What we should remember here is that the Australian stock market is resilient and this previously quoted example is testament to that fact. It needs to be understood that all this hype and sensationalism just leads to mass panic, which results in opportunity being lost for those who do desire to make a mint from the stock market. Needless to say, one must be in tune with their common sense before always thinking the worst. As mentioned previously, remember that the stock market is a science.

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