What Causes a Stock Market Bubble and how to navigate difficult market conditions?

What Causes a Stock Market Bubble and how to navigate difficult market conditions? Hello doston. Angel One ke ek aur informative podcast mein aapka swagat hai. Aaj ke iss podcast mein hum stock market bubbles ke baare mein baat karenge. Stock market bubble ek bahut interesting phenomenon hai. Ye market conditions ya external factors ki wajah se nahi, lekin investors aur traders ke behavior, ya cognitive biases ki wajah se hota hai. More precisely, market bubbles herd mentality ka result hotey hain. Stock market bubble tab create hota hai jab stock market ke traders stock prices ko badha dete hain. Ye price rise stocks ke valuation ke comparison mein hota hai. Stocks, assets, ya poore markets ka price traders ki speculative demand ki wajah se increase hota hai. Iska matlab hai ki in stocks ke prices intrinsically nahi badhta hai. This bubble eventually bursts and stocks are sold in such high frequency that the price falls. Stock market bubbles burst hone ke baad usually ek crash hota hai. History Stock market bubbles ke pehle kuch instances Netherlands mein record kiye gaye hain. 1600s mein Dutch Republic ne economic aur financial activities mein kafi advancements kar liye the. It was the first place in the world jahan par ek formal stock exchange aur stock market establish hua tha. In fact, 1630s mein huye Dutch tulip mania ko world ka pehla speculative bubble maana jata hai. Some other stock market bubbles were the Mississippi scheme in France and the South Sea bubble in England. Twentieth century mein stock market bubbles ke 2 bade instances recorded hain. 1929 mein US ka Wall Street crash hua, jo Great Depression ka reason bana. 1920s mein radio, aviation aur electric power grids jaise kayi inventions ho rahe the. Similarly, in the late 1990s, nayi technologies emerge ho rahi thi. Aise environment mein traders ne kaafi speculative activities ki which led to the Dot-com bubble. Why do Stock bubbles happen? Stock market bubbles usually tab hotey hain jab koi initial public offering ya IPOs ke time pe hot markets create hotey hain. Investment bankers aise times pe naye stocks inflated prices pe issue kar sakte hain. IPO hot markets mein funds speculative trends wale areas mein allocate ho jaate hain instead of institutions jo longstanding economic value create karte hain. Agar ek stock market bubble mein bohot zyada IPOs hoti hain, kayi saari nayi IPO companies fail ho sakti hain. Stock market bubbles create hone ke five stages hotey hain. Stage 1: Displacement: Displacement tab hota hai jab investors kisi naye concept se sway hote hain. For example, agar koi nayi technology ya naye interest rates introduce hotey hain. Historically low interest rates displacement create karte hain. Step 2: Boom: Displacement ke baad prices dheere dheere rise hotey hain. Iske baad, price rise mein momentum hota hai because more and more investors and traders keep entering the market. Aise mein ek boom stage aati hai. Usually, boom ke dauran uss asset ko bohot zyada media attention milne lagti hai. So now, traders think that buying the asset is a once-in-a-lifetime opportunity. Aise aur speculation increase hoti rehti hai. Step 3 : Euphoria: Iss stage pe investors asset ki high price ke baare mein zyada cautious nahi hotey. Asset ki valuation extremes mein pahuch jaati hai. Aise mein kayi naye metrics ka use kiya jaata hai to justify the continuous price rise. Step 4 : Profit-Taking: Iss point pe cautious investors warning signs ko samajhte hue assets ko sell karna shuru karte hain. The idea at this point is to make as many profits as possible. Step 5 : Panic: Iss stage pe stock market bubble burst ho jata hai. Jab stockholders panic karne lagte hain, uss asset ke prices tezi se decrease hona shuru ho jaate hain. Investors iss point pe kisi bhi price pe apne holdings liquidate karna chahte hain. As a result, supply demand se zyada badhti hai aur prices kam hotey rehte hain. How to navigate through a stock market bubble? Usually, jo log stock market bubble ke participants ``fool's gambit" khel rahe hotey hain. This simply means ki woh ye sochte hain ki koi aur unke shares inflated prices pe foolishly khareedega. Low interests ki wajah se bohot investors inflated prices pe bhi shares khareedte hain. Traders usually jaldi jaldi profits banane ke liye bubbles mein participate karte hain. Obviously, stock market bubbles mein participate karne ke kayi saare risks hotey hain. In such a situation, rational traders can navigate the situation by playing the market timer's gambit. Ye bohot simple lagta hai, but it can be difficult to execute. This game simply involves waiting for the market to fall to the right level before investing. Aise investors ko woh level identify karna padta hai jispe wo stocks low prices pe kareed payein lekin bubble burst hone se pehle sell kar payein. Bubbles ke dauraan investors apne portfolios mein SIPs bhi incorporate kar sakte hain. Asset allocations jo ki aapke growth, liquidity aur income needs ko balance kar sakte hain. Portfolio ko apni needs ke according rebalance karte huye yaad rakhiye ki aap kabhi bhi apne comfort ke bahar jaake invest na karein, even if you have a fear of missing out. Apni income, tax aur similar costs ko rebalancing ke time pe dhyaan mein rakhiye. Apne equity aur debt investments ko aap apne risk appetite aur dusri expectations ke according adjust kar sakte hain. That’s all from today’s podcast! Jaane se pehle, aapko remind karate hain ki stock market investing mein risk hota hai. This podcast has been made for educational purposes only. As an investor aapko apni khud ki research bhi karni chahiye. Aise aur interesting podcasts sunne ke liye humein follow karein via youtube and other social media channels. Until then goodbye and happy investing! Investments in the securities markets are subject to market risks. Read all the related documents carefully before investing.