Historic Stock Market Crashes of 1929 and 1987

The history of the stock market has taught us that bull, or favorable markets tend to last longer than bear, or unfavorable, markets. The phrases 'bull market' and 'bear market' describe conditions of the market and come from early bear trappers. They were known for depending on the price of fur to drop so they could buy pelts cheaply to cover previous option trades they had made. At one time bull and bear baiting was a popular sport and depicted the bull and bear as natural enemies. So the term bull market was used to describe the rise of the opposing market.

As widely known worldwide and reported in a Money-Zine.com article, on October 29, 1929, the Dow, a measurement of the stock market as a whole, fell 30 points to close at 230.07. This represented a decrease of almost 13 percent in the overall market. The loss of market value was roughly $14 billion, an astounding amount even now. This meant that total invested in the market by individuals and entities such as pension funds simply vanished. The serious implications of this event affected even those people who had not directly invested in the market. The subsequent depression, although not directly a result of the market crash, further cemented the idea that investing in the stock market would later reduced investors to sell apples on street corners. Finally, the stories and representations of men throwing themselves off roofs and crying at their desks assured the general public that stock investments could only cause pain.

Moreover, 58 years later, the crash of 1929 was exceeded by Black Monday and Black Tuesday on October 19 and 20, 1987, respectively. The Dow's drop of 508 points represented more than a 22 percent decline in the total market value and than $ 500 billion from investors. The crash of 1929 was a lark by comparison. The crash of 1929 was attributed to the market practice of accepting credit to pay for the purchase of stock. It is no longer an accepted practice - at least in the same manner. Further, program trading, or the ability to trade stocks in a matter of seconds through the use of computers, has been blamed for the crash of 1987. The emphasis is not on why the money was lost, but in the fact that the money was lost.

In 1929 stock market reached a new high of 469.49 one month before the crash. And as widely reported in a New York Times article, in the stock market had also reached a new high of 2,722.42, two months before the 1987 crash. One can make a safe assumption that much of the money lost by investors taken from profits from their investments. This does not mean that their losses are not real, though. If at the end of the day, you still have the money you put into the investment, it is difficult to say that you've lost something other than the time that their money has been busy and, of course, opportunities have been lost as a result of it.

Certainly, many stock market fears can be justified. But not to prudently invest with the help of investment experts because you fear a stock market crash may need to be reconsidered.