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I think about it that a better way to deal with stocks might be to set aside a fixed amount of money. GInvest can be a good way to flex those muscles whether they were inexperienced or atrophied. I was thinking that giving up PHP 3,000.02 per month in AXA Chinese Tycoon is another new start. Sometimes, somebody may consider keeping it small. For example, PHP 5,000.00 might be a good start. It would be to invest that PHP 5,000.00 when you don't need it now. Lump-summing can be good but it can also be bad. I think it's one thing to invest a huge amount of money in RTB and LTNCD when the savings account got high. However, stocks might be best subjected to cost averaging.
Learning from the Stock Market Crash of 1929
Overproduction and Oversupply in MarketsPeople were not buying stocks on fundamentals; they were buying in anticipation of rising share prices. Rising share prices brought more people into the markets, convinced that it was easy money. In mid-1929, the economy stumbled due to excess production in many industries, creating an oversupply. Essentially, companies could acquire money cheaply due to high share prices and invest in their own production with the requisite optimism.This overproduction eventually led to oversupply in many areas of the market, such as farm crops, steel, and iron. Companies were forced to dump their products at a loss, and share prices began to falter.
It was a great serious mistake when people bought stocks without fundamentals. Can you imagine if too many people bought the stocks of Jollibee? I could imagine if Jollibee had to produce too much of its Yumburger or Chickenjoy until the quality decreases. Just imagine if Mang Inasal's delicious barbecue chicken starts to lose its value because too many people are buying Jollibee stocks.
Before the crash, we can read that it was a period of great progress also:
In the first half of the 1920s, companies experienced a great deal of success in exporting to Europe, which was rebuilding from World War I. Unemployment was low, and automobiles spread across the country, creating jobs and efficiencies for the economy. Until the peak in 1929, stock prices went up by nearly 10 times. In the 1920s, investing in the stock market became somewhat of a national pastime for those who could afford it and even those who could not—the latter borrowed from stockbrokers to finance their investments.
The economic growth created an environment in which speculating in stocks became almost a hobby, with the general population wanting a piece of the market. Many were buying stocks on margin—the practice of buying an asset where the buyer pays only a percentage of the asset's value and borrows the rest from the bank or a broker—in ratios as high as 1:3, meaning they were putting down $1 of capital for every $3 of stock they purchased. This also meant that a loss of one-third of the value in the stock would wipe them out.
In short, the lack of regulation was also fueled by one thing--people rushing into the stock market. People were trying to become rich overnight and they borrowed money. Unfortunately, the stock market wasn't able to handle it. Worse, the Great Depression was occurring from 1929 to 1939. People trying to become rich overnight ended up losing more in a short amount of time. Trying to get rich quick is why people like Charles Ponzi and the late Bernard Madoff get their advantage. It was also why the Legacy Group of Companies was able to carry out what it did. It's because of people who try to get rich quick. After the incident, people may have abandoned the stock market because they didn't get rich quick. What might've followed is the gambling addiction since people can get rich quick. However, the chances of getting rich gambling are very low since it relies on random wins.
Just reading about the stock market crash--do I want to have my own financial crash? Some people unfortunately still haven't learned from the stock market crash of 1929. A reckless purchase of stocks is just plain insane and should be discouraged. People shouldn't even borrow money they can't afford to pay. Banks and stock markets should be careful about who enters into debt and trade. These all can affect the economy in many ways. It should be better to find safer ways such as cost averaging if one's not sure or to do some research. Don't expect to get rich quick because stocks don't guarantee to get rich quick overnight.