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Stock Market Cycles

Many investors that are new on the stock market get panicked when they hear that the market has dropped significantly. However, experienced stock investors are well aware that such falls are absolutely normal being part of the business cycle.

The overall trend of the market is as follows: prices rise (the market expands) over a period of time, whereas during this period there are small retreats. However, a point is reached at which the market becomes a little bit volatile.

After this point is reached, the prices start to fall, also known as sell-off, triggered by some event such as war, economic news and etc. A correction of this sell-off is expected and hoped but it may not come for days and even weeks.

This trend is not always observed, but this is the usual course of the economic cycle.

After the sell-off occurs, different corrections are applied to save the situations.

In March 2000, the so called Internet/Tech bubble that has started to inflate in the late 1990s burst leaving the NASDAQ with a one-half of its over-inflated value loss. It may not be able to recover in the decades to come.

Even though stocks have proven their long-term profitability, investors that use them should be aware that there are times of no or stagnant growth that may leave them with relative small returns. Holding stocks over the long-term requires you to be good at the trading game, otherwise, you should be ready to say goodbye to your money.

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