Why a Stock Market Crash is Nothing to Fear

by Andrew McGuinness     Jul 16, 2019

As a first-time investor, one of the biggest worries that is probably looming in the back of your mind is the fear of a stock market crash. You've heard horror stories of families losing everything during the crash that predated the Great Depression, and countless online articles pop up during every recession about investors who have lost their fortunes at the turn of a bear market. However, the stock market crashes of today have a tendency to bounce back much quicker than those of the 1920's- and while a crash can spell financial trouble for an established investor, they can also open the door for new opportunities to first-time investors with less money to burn.

Though some stock market crashes have been the result of economic or political corruption, the truth is that a crash is a naturally occurring part of the market cycle; after every booming bull market comes a bear, and there's really no way to prevent this downturn because, more often than not, there is little reason for the decline in the first place. The public perception of a stock market crash is that it must occur due to something dramatic and wrong with the current market. This perception was set into place by media outlets searching for a cause for blame to assign to the sudden dips in the market. Most people can recognize that the crash of 1987 was a result of overvalued stock and the crash of 2000 stemmed from corporate corruption; however, there have been many more crashes that failed to garner such massive attention because the truth is that they were simply caused by a lack of investor confidence and an unusually high level of selling. While you'll definitely feel a bit of a sting during a crash if you've already invested several hundred thousand dollars, bull markets present a great opportunity for new investors to buy up stocks for a fraction of the price when compared to those same prices during a bull market. In fact, plenty of millionaires have made their fortunes buying during a market crash.

If it's your first time investing in the stock market, the perception of a crash can be a scary one looming over you and encouraging you not to risk your money. However, the truth is that a stock market crash is actually the best time for investors with only a few hundred or thousand dollars to spend to gain their footing in the market. Though a crash can make you rethink your strategy, the key to smart investing is knowing that the market will eventually bounce back. The smartest investors and stock market analysts don't fear a crash because they are experienced enough to know that a bull market will quickly follow after a bear, and the average prices of stocks will rise again.

This year, be a smart investor and trust in the power of the United States market- monitor stocks you're interested in carefully, and buy when the prices are lowest!

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