What exactly is a Market Crash? How does it affect you?

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Dennis Ng
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What exactly is a Market Crash? How does it affect you?

Post by Dennis Ng »

Below is a question someone asked at another forum and my reply to him for your easy reference.

Cheers!

Dennis Ng, http://www.HousingLoanSG.com
Originally posted by newleggy
Having been in the market for less than 10 years, I have always wondered when many people here mentioned the word "crash". I've never seen a crash, so how does it look like? I only know that the market goes up or goes down or trades sideways, but what is a crash?

Can you be more specific about it in explanation, for those who do not know what happens in a CRASH?

How are investors affected in a crash?
A stock market crash typically refers to when stock indices dropping by more than 20%.

However, do note that some rubbish penny stocks would drop as much as 50% to 95% when market crashes.

Just take a look at historical stock price stransaction record to verify whether I'm speaking the truth.

In the Tech bubble crash, Nasdaq dropped by over 70% from over 5,000+ points to about 1,400 points. During the 1998's Asian crisis, STI index dropped by over 60% from over 2,000+ points to 800+ points.

Recently, we had the 10th Anniversary of the Asian Crisis. When I read some newspaper reviews saying that Singapore was not much affected I laughed. After 10 years of "time healing", people forgot what really happened. To say Singapore was not much affected is really a lie. Many companies went under, tens of thousands of people were retrenched, our stock market crashed over 60% and our property market crashed by 50%....I really cannot understand how anyone can put it as Singapore was not badly affected.

When a Crash comes, Wealth Re-distribution typically occur on a Massive Scale. In a crash, you would see those who were "rich" became poor or even bankrupt.

Of course for those people who are well positioned (have Opportunity Fund), a Market Crash actually represents a Rare Opportunity for them to scoop up bargains, and some of these people can move from Middle Class to become Rich. And the Rich might become even Richer.

Thus, important question we need to ask ourselves is should a Crash happens, how are we positioned financially ourselves?

Your answer to this question will determine whether a Crash means a Crisis to you, or would it be an Opportunity for you?
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
Dennis Ng
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Posts: 9781
Joined: Tue Nov 29, 2005 7:16 am
Location: Singapore
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What will be the impact of China Stock Market bubble burst?

Post by Dennis Ng »

People have short memory.

Most people might NOT have remembered that Shanghai stock market crashed in year 2001 at over 2,000 points and bottomed in Jun 2005 at 1,000 points. It took 1 year 5 months to reach back to 2,000 points in Nov 2006. The scary part is in less than 1 year, the market TRIPLED from 2,000 points in Nov 2006 to now OVER 6,000 points in Oct 2007.

If this is not a bubble, I don't know what is.

The scary thing is this bubble might get bigger and might even exceed 8,000 points by next year before it finally burst. When it burst, I’ll not be surprised if prices drop by 50% or more to be about 3,000 to 4,000 points only.

In April 2007 alone, more than 1.674 trillion yuan as withdrawn by people in China from Bank deposits to GAMBLE in the China Stock Market. One day trading volume can be over 46 billion dollars and volume now exceeds ALL THE STOCK MARKETS IN ASIAN REGION COMBINED.

When China stock market crashes, China economic growth is likely to plunge and we must not forget that China is the MAIN Economic engine driving World Economic Growth now. When that happens, world’s economic growth would suffer.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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