Are you among those who do not invest in the stock market? Do you think that stock market crashes do not concern you?
But … the truth is … they do!
Not only those who actively trade lose money. The average person also loses money and opportunities. To show how, 24/7 Wall St. make a list of eight ways in which market collapse affects people’s lives:
1. Reducing employee income
Stock market crashes hurt employees’ incomes in several ways. Initially, when the market is soft, companies tend to take advantage of pension benefits by eliminating pensions and corresponding to 401 (k). Motivated by the same concerns, they reduce other types of benefits, such as health care and dental plans. The 2008 U.S. Chamber of Commerce survey of employee benefits found that “employers began to reduce employee incomes as the economy slowed in 2007, even before last fall’s economic curve, partly fueled by credit crunches. markets ” The Wall Street Journal. “The average dollar income of employees fell 14 percent to $ 18,496 in 2007 from $ 21,527 a year earlier.”
2. Deferred retirement
Nothing kills retirement like Crater 401 (k) – when the value of savings is meant to finance life after people stop working vertically. The difference between a $ 1 million portfolio and a $ 500,000 portfolio could be the difference between retiring at age 65 or working until age 70 – as a large number of people found when the market collapsed in 2009. According to a USA Today study by AARP 2009 found that “35% of those aged between 45 and 54 have stopped investing in their 401 (k), IRA or other pension accounts, 25% say they have withdrawn funds early from their pension accounts. “
3. Sale of housing
Are stock markets and domestic markets linked? Absolutely. More than 20% of housing loans in the United States are under water. To sell these homes, homeowners need to figure out the difference between what they can sell the house for and what they owe the bank. This difference can certainly reach tens of thousands of dollars. If the money needed to bridge this gap is tied to the stock market, owners will find it difficult to sell.
4. Buying a home
It has become difficult to get a mortgage, even though interest rates are at historically low levels. Banks want to lend when house prices continue to fall freely. The downward market makes banks even more cautious: they tend to tighten credit standards, demand higher credit ratings, tighten credit limits, raise minimum payments, and generally make it difficult to qualify for a loan. On top of that, all the assets that potential homeowners set aside for down payments are often partly in shares.
5. Education postponed
College funds held by many parents for their children’s higher education are usually included in some of the shares. The stock market adjustment drags the value of these funds down and, as a result, makes it more difficult to pay for training. During the middle of the last recession, enrollment in cheap colleges and public colleges increased by an average of 16 percent in 2009, according to US News & World Report. One of the reasons: “reverse transfers”. Students at expensive four-year universities are moving to cheaper two-year schools to complete their basics cheaply. “
Businesses are quickly feeling the pulsating effects of a market collapse. Some keep cash in their balance sheets, but this is often mixed with stocks. A rapid and sharp decline in the markets could undermine the company’s assets. This in turn makes it more cost-effective, which includes a payroll. Another reason companies revise employment levels when markets sell out is that the downturn is likely a precursor to an economic slowdown. If a company sees a recession in its business, it can cut workers preventively.
7. Buying a car
One thing that car companies discovered three years ago is that consumer confidence is harder to achieve when the market adjusts by 30% or 40%. The psychological effect is only part of it. People with some of their net worth in the stock market usually limit their spending on more than the most important things until they see a jump in value. And after a huge adjustment, the rebound can take years. In addition, like a home loan, obtaining financing becomes a much bigger challenge. JD Power & Associates lowered its forecast for car sales in the United States in 2011 from 300,000 cars to 12.6 million.
8. Starting a small business
Starting a small business is not financed by venture capital money. People use their own savings or borrow from friends and family the start-up capital needed to start a new company. The sale on the market harms start-ups in two ways. First, it shrinks the nesting eggs that humans can use to start a new venture. Second, it hinders the prosperity of the start-up, as confidence in business and consumers is low. The Wall Street Journal reports that according to the Census Bureau, the number of new companies created in the 12 months ending March 2009 decreased by 17.3% over the previous year – the least since 1977. when the Census Bureau begins to keep records.