Nowadays, everyone is feeling restless because of the current pandemic going on. Along with ensuring the safety of our own and loved ones, we all need to deal with factors like inflammation, market crash decreased income, and lockdown as well. According to history, there have been several events occurred that have pressurized economic diversity. However, the major fact that matters is how the markets survived all the crashes, blackouts, and get bounced back. Since we are in a difficult situation but still we are sure that sooner or later, the markets will get recovered eventually. Here considering the same, we are going to take a quick look at the fast stock market crash and list some lessons.
Major Historical Stock Market Crashes:
According to the previous statistics available, here are the major historical market crashes that are required to be noted.
- 1929: The Great Depression
- 1946: Post World War II
- 1961: Cold War concerns
- 1968: High Inflation and the Vietnam War
- 1973: The end of the Bretton Woods monetary system
- 1980: Interest rate hikes and rise in unemployment
- 1987: Introduction of computerized trading
- 2000: Bursting of the dot-com bubble
- 2007-08: Collapse of the US housing market causing an economic recession around the world
These are all the global events that have impacted the stock market a lot. However, even after suffering through the major events drastically, the markets have always bounced back and earned good returns. To understand it more deeply, let’s take a look at the stock market crash of the year 2007 and analyses how the market gets recovered.
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Case Study, the Stock Market Crash of 2007-8
In the year 2007-8, in the US, the housing market gets collapsed diversity and it was actually a global economic recession that has to lead the market crash in several other countries. However, India was not impacted as severely just like others. But still, the ripples were what are strong enough.
If we go to the Sensex, in 2008, the Sensex dropped 9000 points from the previous high points. But still, over the next 5-6 years, the economy gets stabilized and the market started recovering. Even during the recovery period, there were several factors having a great role. Those who head their investment in the year 2008 due to panic have faced huge losses. In order to understand all the situations more clearly, let’s take a look at the performance of the lockdown equity fund.
DSP Equity Fund Regular Plan-Growth:
In this fund, around 98% of the investable assets in equity and equity-related securities need to be invested. In the year 1997, this scheme was launched on April 29 and for nearly 23 years, it has been in existence. Let’s take a look over the factors that will help out in understanding how the scheme actually performed over the years.
- On November 20, 2007, before the economic crisis caused market crashes, the NAV of this scheme was 13.79.
- This dropped down to 7.18 on December 1, 2008 – a drop of 48%! Investors were panicking and many of them might have sold their investments to curb any further losses.
- However, as the economy stabilized and the markets started bouncing back, the NAV climbed to 15 by January 6, 2010.
Hence, if any of the investors had invested their money in the scheme on November 20, 2007, and gone through the market crash also then he would have stood to gain around 9% on January 6, 2010. on the other hand, the investors who redeem their amount due to having the risks of loss, have booked the loss of 48%.apart from this, on January 23 in the year 2018, then a v of the scheme was around 40and therefore the investors would stand again around 1 91% on the investments of the n a v of 13.79 in around 10 years.
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After going through all the events, there are some factors that we have learned.
Major lessons we have learned
Do not get panic when any sort of downward situation occur and do not sell your Investments. This usually led to the loss. It is important to understand the difference between the notional loss and a realized loss.
It is important for you to ensure that you are investing in fundamentally strong securities. Especially when you are going for the SIP investment, you must take a look over the fundamentals of the securities. Usually, it happens that during the market crash, some companies do not have the strength to handle the storm.
Try to avoid choosing the way of investing a lump sum amount. It usually increases the list of losses by choosing any wrong investment. Try to go for a slow and steady approach to investment.
It may happen that you feel the urge to speculating. Don’t stick with the basics of investment.
According to the historical statistics, always markets get recovered from the crashes and bounce back even more strongly. Always take a look over the long-term and try to adjust your portfolios accordingly.
Most people aren’t aware of the stock market which is getting crashed day by day due to pandemic. For those people, the above discussion will offer some clear idea that what the stock market is experiencing in the current scenario.
Smriti Jain is the owner and senior content publisher at Financesmarti. Financesmarti is a website where she shares a lot of useful stuff for the people and business of India. This includes small business ideas and other banking information, as well. Smriti completed her education in science & technology from Delhi University. Smriti usually has interests in digital marketing now, and she has chosen this career for the full-time opportunity. The primary purpose of starting this blog to provide quality information on the banking industry to the people.