Picture investing your money in a stock, watching it shoot up to the sky overnight, and enjoying the delusion of being a genius! Then, as soon as everything seems fine, it crashes again making you confused about what has gone wrong. Such is the tale of market bubbles- excitement, fever, hype, and after that, an inevitable crash. History has seen this cycle from the time of the Harshad Mehta Scam to the Dot-Com Bubble and the Cryptocurrency crashes of the last years.
But what causes these bubbles, perhaps the more important is to know how we can learn the Lessons From Past Market Bubbles In India.
Before we learn the Lessons From Past Market Bubbles In India, we need to know exactly what the Stock Market Bubbles are.
A market bubble arises when the price of an asset, stock, property, or even such bizarre things as tulips is artificially elevated far beyond its intrinsic value because of unreasoned demand or mere speculation. If investors buy into the hype rather than the fundamentals, prices go up unsustainably. Eventually, reality kicks in, greedy investors panic, and a bubble bursts, creating massive losses.
It is time to undergo an intensive discussion and study some of the biggest bubbles that were created in India's past financial history, seeking lessons that would help with investment substantiated as smart decisions.
Harshad Mehta, a stockbroker, entrusted some loopholes in the banking system and manipulated the stock prices, leading to an artificial boom in these stock prices. The exposé of the scam led to the crashing of the stock market, with billions of rupees disappearing within weeks, leaving retail investors with immense losses.
Lesson: If an investment opportunity is rising in price too fast to be considered normal, it is probably advisable to conduct a thorough investigation. Manipulation can create artificial bubbles that eventually burst, leaving investors in heavy losses.
In the early 2000s, Ketan Parekh targeted a few specific IT stocks and manipulated their prices upward. Stock market investors, the retail ones, never got to make their trades due to this scam because shortly afterward, scams blew the stocks up.
Lesson: Playing to follow trends can be dangerous at times. Do internal research about a stock's fundamentals before investing, even when it seems to be a sure winner.
The years 2005 and 2013 saw India undergoing one of the most real estate booms ever. Easy bank loan programs and increased consumer interest by investors were the possible things. Property prices reached unsustainable levels; long-term declines occurred afterward in the real estate sector.
Lesson: Even overvalued asset classes have a way of correcting themselves. Ensure that real estate prices reflect genuine demand or sales rather than speculation before investing.
Bitcoin, Ethereum, and other cryptocurrencies registered some of the highest price surges, with most investors benefiting tremendously. Sudden regulation changes and market corrections slapped losses on many of them.
Lesson: New financial instruments have proven highly volatile. Invest only that which you can afford to lose while making such investments. Always diversify your investments.
While bubbles will continue to happen, smart investors can safeguard their money by following these principles:
Never invest in something just because everyone else is doing it. Before putting money in stocks, real estate, or crypto, understand its fundamentals—revenues, earnings, debt levels, and future potential.
Don’t put all your money into one asset. A well-diversified portfolio spreads risk across multiple sectors, reducing potential losses from a single market crash.
By the time most people hear about a “hot” investment, it’s often too late. Prices are already inflated, and entering at that stage is risky. Instead, look for solid investments before they become mainstream.
Short-term profits are an attractive prospect, but long-term investment in fundamentally strong assets usually gives better payoffs. True investors always believe in long-term value, as opposed to short-term speculation.
Before investing, check for over-leverage in the company or industry. If the average guy on the street is borrowing to invest, that’s a green light warning (the way it was before the 2008 crash).
Market bubbles will exist forever as human nature, which is greedy, fearful, and speculative never changes. But history disciplines us that we can and must learn the Lessons From Past Market Bubbles In India to stop ourselves from repeating the mistakes of the past. Staying informed, investing carefully, and being patient will stand anyone in good stead toward success over the long haul.
So, next time you see an investment doubling in value overnight, step back and ask: Is this about to burst like a bubble?
> Here’s the link to the YouTube Channel below created by Ruchir Gupta, India’s Leading Stock Market Mentor and currently the Most Trending Role Model in the Stock Market Industry where he illustrates every topic related to The Stock Market deeply by stating different relatable causes and effects and also coming up with appropriate solutions to the Problems!
Go and watch to avoid problems and learn about the stock market with exact logic and strategies!
Don’t forget to Subscribe to RUCHIR GUPTA & RUCHIR GUPTA PODCAST on YOUTUBE
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Read MoreAs a prominent Stock Market Trainer, Ruchir Gupta provides training in various stock market tactics through his specialised courses.
At Ruchir Gupta Training Academy, we can train a beginner into a pro trader in just one month. We use the highly proven GCD (Date, Direction and Target) method, which significantly enhances accuracy in identifying market trends and targets. With our comprehensive training approach, you'll gain the skills and knowledge needed to earn from the stock market successfully.
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Students enrolled in our share trading course have access to a wide range of recorded video lessons and scanners designed to enhance their learning experience. Apart from these students are also provided with a mighty community and telegram group where they can interact with their fellow learners of the course and enhance their knowledge.
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