investing guide

The 1929 Stock Market Crash

1929 stock market crash

Even if you have never invested in the stock market you have probably heard of the 1929 stock market crash.

So probably the biggest question most people have is can that ever happen again?

Well of course you can never say never. However, a lot has changed since 1929 and the odds of a 1929 style crash happening again are very slim. This is because the rules of the markets have changed dramatically since 1929.

One of the worst causes of the 1929 crash was investors buying too much stock on margin. In 1929 people could borrow up to 9 times their original investments. To put that in perspective, today you can usually only receive a 2-1 margin rate. This one fact alone is what most people blame the crash on. This is because people were basically using "paper money" instead of "real money" to pay off what they owed on their original investments.

Therefore, when the markets started to crash for various economic and social reasons; no one had any "real money" to pay back their original investments. This led to people losing everything they owned.

In 1932 the Securites and Exchange Commission was created to bring stability into the markets.