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A sudden, severe drop in stock prices, usually 20%+ in days or weeks.
Why It Matters
Crashes are terrifying in the moment but predictably followed by recovery. The 2008 crash saw the S&P 500 drop 57% - and those who held on saw it fully recover by 2013 and then quadruple by 2021. COVID crashed the market 34% in March 2020; it recovered in just 5 months. The worst thing to do in a crash is sell.
Key Points
- Major crashes: 1929 (89% drop), 1987 'Black Monday' (22% in one day), 2008 (57%), 2020 COVID (34%)
- Crashes feel like the end of the world at the time - but markets have recovered from every single one
- Investors who panic-sell lock in their losses; those who hold (or buy more) benefit from the recovery
Related Terms
Common Questions
A sudden, severe drop in stock prices, usually 20%+ in days or weeks. Crashes are terrifying in the moment but predictably followed by recovery. The 2008 crash saw the S&P 500 drop 57% - and those who held on saw it fully recover by 2013 and then quadruple by 2021.
Crashes are terrifying in the moment but predictably followed by recovery. The 2008 crash saw the S&P 500 drop 57% - and those who held on saw it fully recover by 2013 and then quadruple by 2021. COVID crashed the market 34% in March 2020; it recovered in just 5 months. The worst thing to do in a crash is sell.
Major crashes: 1929 (89% drop), 1987 'Black Monday' (22% in one day), 2008 (57%), 2020 COVID (34%)
Crashes feel like the end of the world at the time - but markets have recovered from every single one
Investors who panic-sell lock in their losses; those who hold (or buy more) benefit from the recovery