Stock Market Crash – What Causes?
You can usually predict that a stock market crash will occur before the event. There are some events that occur before the crash and cause it. First of all, the market is quite weak, this situation is called a bear market. When this happens, many people are eager to invest in stocks, believe that the value of these stocks will inevitably rise, so that they get a good profit. This interest in the market does lead to an increase in the value of the stock, a bull market, in other words a particularly strong market.
At this stage of the investment cycle, mutual funds are a particularly popular type of investment. The market is fairly stable at this stage, and there is a good investment in the early stages of the cycle.
More investors join in this stable part of the investment cycle as investors are encouraged to buy and increase the stock market Of the profits.
Bulls release stocks to the market during a bull market, and an IPO or initial public offering is common during this period before the stock market crashes. In this case the company has done a good job, the value of the stock rose sharply, investors have great confidence in the value of the stock. More and more money is being sought to become the first investor to buy stocks in a particular company.
Investors who buy stocks at the beginning of the cycle are now keen to sell them before they lose money because they know that their stock value will soon fall. Sometimes in the bull market, there may be corporate-level scandals and scams, because people become greedy. The market is flooding with stocks, but the value of stocks is expected to continue to rise.
The ultimate stock market has reached the point where people invest so much that it is overbought and the only way is to drop. This is the beginning of the stock market crash. Stocks start to lose value. When people realize that fact, they want to sell, before you know, everyone is selling rather than buying, which leads to the stock market crash.