Have you ever heard the saying, "What goes up must come down"? Well, in the investment world, this is sometimes all too true. We're talking stock market crashes — those infamous moments when investors see their portfolios go downhill like a roller coaster. There's nothing more exciting than crashing a car when you're not there; conversely, it can be the worst nightmare for anyone involved with a destroyed company or asset. We'll take a look at 12 famous stock market crashes in history and why, so you can be alert enough to read the signs and cushion yourself against the next big one.

1. Tulip fever (1636-1637)

Let's start with the tulip mania of the 17th century. Believe it or not, at one point in the Netherlands, tulips were worth more than gold. People were buying and selling tulip bulbs at outrageous prices, and in 1637 the tulip market suddenly crashed and everything fell apart. It's a good reminder that just because something is popular doesn't always make it a good investment.

2. South Sea Foam (1720)

Fast forward a few decades and we have the South Sea Bubble. It was a stock market frenzy in Britain as investors poured money into a company that had a monopoly on trade with South America. As you can probably guess, the bubble burst and investors lost a lot of money. Learned knowledge? Beware of the hype and always do your research before investing.

3. Wall Street Crash (1929)

Ah, the Roaring Twenties. It was an overly optimistic era, but everything came crashing down in 1929 with the Wall Street Crash. Within days, the stock market lost nearly 25% of its value, and the Great Depression ensued. This crash is a reminder that markets are unpredictable and that it is important to have a diversified portfolio.

4. Black Monday (1987)

We've already mentioned Black Monday, but it's worth revisiting. It was the largest one-day percentage drop in stock market history and stunned investors. The market lost nearly a quarter of its value in just one day. It's a good reminder that even the steadiest markets experience sudden and sharp declines.

5. 9/11 Attacks (2001)

The terrorist attacks of September 11, 2001 hit the stock market hard. Markets were closed for a few days after the attack and reopened with sharp losses in value. The attacks are a reminder that even seemingly unrelated global events can have a major impact on the stock market.

6. The Internet Bubble of 2000

In the early 2000s, Internet companies experienced a huge rise, and many investors poured money into these companies in the hope of a good return. However, the bubble soon burst and the stock market fell sharply. The tech-heavy Nasdaq has lost about 80% of its value, and once-billion-dollar companies like Pets.com, Webvan and Boo.com have gone bankrupt.

7. The 2008 financial crisis

The 2008 financial crisis was one of the worst economic downturns in modern history. This was caused by a combination of factors including the collapse of the housing market, the failure of major financial institutions and the explosion of subprime mortgage lending. The crisis resulted in massive job losses, the closure of many companies, and a global recession that lasted for several years.

8. The 2010 Flash Crash

On May 6, 2010, the US stock market experienced a sudden and rapid decline, the so-called flash crash. Within minutes, the Dow Jones Industrial Average dropped about 1,000 points, and the prices of many high-quality stocks fell by only pennies. The cause of the flash crash is unclear, but some experts believe a massive sell-off in stock futures contracts may have triggered it.

9. Black Monday in China 2015

On August 24, 2015, China's stock market experienced a massive sell-off known as "Black Monday". The Shanghai Composite Index fell about 8.5% in a single day, and the government had to intervene to prevent a full-blown market collapse. The crisis is caused by a number of factors, including concerns about China's economic growth and the country's currency depreciation.

The 10th COVID-19 crash of 2020

The COVID-19 pandemic has ushered in a new era of economic uncertainty, with the stock market suffering some of the biggest losses in history. In March 2020, the S&P 500 lost about 12% in a single day, and many other indexes saw similar sharp declines. Governments around the world have taken unprecedented action to mitigate the impact of the pandemic, which has caused widespread job losses, business closures and economic disruption.

11. The GameStop Legends of 2021

In early 2021, amateur investors on Reddit started buying shares of struggling video game retailer GameStop, causing the stock to soar in value. That led to a short squeeze, forcing hedge funds that had been short the stock to buy it back at a much higher price, causing heavy losses. The GameStop incident illustrates the power of social media and the potential for ordinary investors to disrupt traditional stock markets.

12. The Evergrande crisis in 2021

China's real estate market has grown rapidly in recent years, with companies such as Evergrande becoming major players in the industry. However, in September 2021, Evergrande faced a major crisis, as the company was clearly burdened with huge debts. That sparked widespread concern in the stock market, as investors worried that China's economy could collapse.

Diploma

Stock market crashes are a recurring feature of economic history, with many major events causing widespread disruption and uncertainty. While it's impossible to predict the next crash, it's important to understand the potential risks and take steps to protect your investment. By diversifying your portfolio, monitoring market trends and seeking expert advice when needed, you can help mitigate the effects of future market downturns.