Stock Markets Exposed

during a stock market crash do all stocks go down? If so is that not a perfect time to by market leaders?

Public Comments

1. That is a perfect time to buy "proven winners". Take for example when MCI Worldcom had it's big event a couple of years ago. The stock went from $38 share, to .96 cents a share in two weeks. Smart guys like me bought it up at nintey six cents, and now I have a thousand shares worth about $29 share.
2. it does go down and if you buy,it might go bankrupt and you lose money and it also depends on the price
3. No, not all stocks go down. Three out four stocks go down.
4. If you are going to buy during events like this, it is definitely preferable to buy a basket, index or fund. During crashes there will be individual issues that do not recover. Sometimes recoveries take many years. You need to manage these risks. The 1930s and 1970s are examples of periods when leaders did not recover for many years. Examples of stocks that never came back are Worldcom and Enron.
5. there is an old adage. Buy low. Sell high. And yes you are correct. That is the very best time to buy market leaders. I dissagree with one of the comments that only 2 out of 3 stocks fall. It has been my experience that they all fall with maybe a very few exceptions. There are certain companies that are considered blue chips. A few examples are Microsoft, Proctor and Gamble, Budwieser, Exxon-Mobile. During a crash stock values tend to drop a lot--70% is not uncommon. There is a trick to investing during a crash and that is determining when stocks have hit bottom. This is very difficult to do. The crash of 1929 did not hit bottom until 1933 and then did not actually recover to the previous high until 1955 or thereabouts. Then in the mid 1960's it hit another high to which it did not recover until the mid 1980's. It then went on a tear until it peaked in 2000. It has been consolidating ever since. The consolidation may last a LONG time. During the crash of 1972-1974, if I remember correctly, the average PE dropped from about 25 to about 8. A drop of 2/3. December of 1974 was an excellent time to buy IBM. Back then IBM was the premier blue chip. Kodak was not far behind. Now they are not considered blue chips any more. Technology left them in the dust. During the crash of 1929, there were a lot of investors that thought that 1930 was a good time to jump into the stock market. They were sadly mistaken. Stocks fell another 70% from 1930 to 1933.
6. Another related investment phenomenon that pertains to this is "flight to quality..." ...The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This flight is usually caused by uncertainty in the financial or international markets. However, at other times, this move may be an instance of investors cutting back on the more volatile investments for the conservative ones (i.e. diversifying) without much consideration of the international markets.
7. 1) No 2) No