With the stock market down, it’s a good time to look back at some of history’s biggest crashes. What caused these disasters and how did they affect society?

The “biggest stock market crashes in history by percentage” is a list of the 10 worst stock market crashes in history. The article also includes information on how to avoid these crashes and what caused them.

The 10 worst stock market crashes in history

When I first discovered what a “stock market collapse” was, I was a college intern at a small investing business. The year was 2001, and the stock market was already in decline. Following the sad events of September 11, 2001, the stock market continued to decline in value.

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How the S&P 500 looked in 2001

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This graph may depict how the stock market fall “appeared,” but I guarantee you that it does not depict how it felt.

The expression of despair on the faces of the financial experts with whom I was dealing did not go unnoticed. For those who were there, the crash didn’t end in 2001. It went on long into 2002, wiping off millions of dollars in our nation.

That was the worst stock market meltdown I’d ever seen in my life. Until 2008, that is…

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How often do stock market collapses happen?

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Stock market collapses are sometimes misunderstood by new investors as infrequent occurrences when, in reality, the reverse is true. Every few years, the stock market crashes. While the COVID Collapse of 2020 was a nightmare in and of itself, it was far from the worst crash in history.

That one was so brief that you probably have no recollection of it. But, having witnessed two stock market collapses very close together, and knowing that no one has faced a really terrible down market in over 13 years, I believed it would be prudent to caution prospective investors.

Especially for individuals who began investing using online applications or brokers and have only seen green in their accounts while checking their balances.

I’ve compiled a list of the The Top 10 Worst Stock Market Crash Ever to put the stock market collapse factor into perspective.

Stock market collapses occur in different kinds and sizes, as you’ll see, and they’ve happened before. This list dates all the way back to 1907, demonstrating how long crashes have been occurring.

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What is the definition of a stock market crash?

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A stock market collapse is characterized by a sharp drop in share values. Stocks are prone to fluctuation, even on the same day.

There may even be discernible trends, such as the market climbing a few percentage points one week and then declining a few the next. It everything works out in the end, as the market either continues to climb or remains in a limited trading pattern.

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A crash may be thought of as a disruption in the typical routine.

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The market goes into a deep plunge rather than continuing the cycle of short-term gains and losses.

There is no clear definition of what constitutes a stock market collapse, and they are often named after the fact. A stock market crash, on the other hand, is defined as an extremely big drop in the market that occurs within a short period of time.

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Stock market crashes have a variety of causes.

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Market collapses may occur as a result of long-term gains that can endure for years. These are commonly referred to as bubbles, and they may burst if values go too high. The Dot-com Bust of 2000 (which came in at #8 on our list) is an excellent illustration of this.

The losses in the crisis were concentrated in technology equities, which reached levels unrelated to their financial fundamentals. Even if it didn’t seem clear at the time, what occurred next was very expected.

Market collapses may also be triggered by large events. The Crash of World War II (#7 below) and the Crash of 2020 (#10) are two examples. A world war caused one, while a worldwide epidemic caused the other.

Market crashes, like market bubbles, endure until they burst. This is frequently produced by a mix of stock prices dropping to more reasonable levels, as well as certain good events that counteract the pessimism that led or contributed to the collapse.

As a result, each accident lays the stage for the next explosion. As a result, we should see stock market disasters as opportunities to acquire equities at great discounts.

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What’s the Difference Between a Bear Market and a Stock Market Crash?

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It’s not always easy to tell the difference between a stock market collapse and a bear market. This is mostly due to the fact that the ultimate outcome is always the same: most investors lose money, and frequently a significant amount of it.

The biggest difference between the two, though, is duration. Short and sharp crashes are common. For example, the stock market may drop 30% in only two or three months. Or, like in the case of the 1987 Crash (#9), it may just last a few weeks.

There have been a few crashes that barely lasted a few of days. Flash crashes are the most common kind of crash.

Bear markets, on the other hand, are more likely to endure. They usually last at least a year, but they may commonly last two or three.

Some bear markets, such as the Crash of 1929, lasted years and included many collapses.

This murky area between stock market collapses and bear markets also explains why numerous rankings of the worst crashes in history exist.

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The Top 10 Worst Stock Market Crash Ever

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Our list of the The Top 10 Worst Stock Market Crash Ever takes in every identifiable crash since 1900. In most cases, I’ve used the Dow Jones Industrial Average to determine the percentage decline and duration of each crash.

That’s because it was the primary measure of the stock market, at least until the 1970s, when the S&P 500 and the NASDAQ started becoming more standard measures.

The top ten stock market collapses in history are as follows:

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1. From 3 September 1929 until 8 July 1932

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89.2 percent decrease in percentage

34-month duration

This is without a doubt the worst stock market meltdown in history. It was the first of a series of crashes that happened during the Great Depression, which lasted from the 1930s until the early 1940s.

The Crash of 1929 was particularly devastating because it came after a decade of double-digit yearly stock market gains. Then, all of a sudden, the crash happened. In little over two months, from September 3 to November 13, the market lost 45 percent of its value. That is very certainly the single largest flash collapse in history. Regrettably, this only got the market halfway to its eventual bottom.

The worst of the collapse occurred over the course of three trading days. On October 24, dubbed “Black Thursday,” the stock market lost 11% of its value due to excessive trading.

Following that, on October 28, just two trading days later, came Black Monday. The market lost another 12.8 percent on that day.

The punch-drunk market was hammered the following day, Black Tuesday, when it lost 11.7 percent of its value. In only two days, the market has lost 25% of its value. This resulted in the largest two-day stock market loss in history.

Attempts by affluent investors to infuse cash into the market and support prices were unsuccessful. On the New York Stock Exchange, several equities had no buyers at all, producing a worst-case situation. Following the collapse, hundreds of businesses filed for bankruptcy.

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By the Numbers: The Crash of 1929

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The Dow Jones Industrial Average had the longest bear market in history from start to finish. The Dow Jones Industrial Average peaked at 381.17 on September 3, 1929, and peaked at 41.22 on July 8, 1932. As a consequence, the entire loss was 89.2 percent.

The collapse was so severe that it took until November 23, 1954 for the index to rebound to its pre-crash level. To put it another way, if you had invested in the market in September 1929, it would have taken your portfolio little over 25 years to completely recover.

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2. The period from March 6, 1937, until March 31, 1938

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Decrease in percentage: 54.5 percent

12.8-month duration

Despite the fact that the Crash of 1929 reached rock bottom in 1932, it did not usher in a new bull market. The 1930s are marked by a succession of crashes, as detailed in the preceding crash. One of such accidents was the one that happened between March 6, 1937, and March 31, 1938. It wasn’t just any collapse, though, with the market falling by more than half in little over a year.

Despite the fact that the worst of the Great Depression seemed to be passed, and the economy and financial markets had made great headway since the bottom in 1932, little stability existed. The Great Depression of 1937-1938 began in 1937, resulting in a severe drop in the stock market.

Unemployment rose from 14.3 percent in May 1937 to 19 percent in June 1938 during this period. Meanwhile, industrial production dropped by 37%. In addition to the recession, there were concerns about Franklin D. Roosevelt’s New Deal’s capacity to pull the economy out of the Great Depression.

In April 1938, only a few months before the recession recovery began, the stock market began to rebound. The Dow Jones Industrial Average, on the other hand, would not regain the ground it had lost until 1945, when World War II came to a close.

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3. From October 9th, 2007, through March 9th, 2009

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Decrease in percentage: 54.1 percent

17-month duration

This is the worst financial crisis since the Great Depression. It almost mirrored the decrease of the 1937–1938 catastrophe, although over a longer period of time. The Dow Jones industrial average dropped from a high of 14,164.53 before the collapse to a low of 6,469.95.

While the decline in the Dow Jones industrial average reached 54.1%, the declines in the NASDAQ and the S&P 500 were slightly larger, at 54.9% and 56.8%, respectively.

Though the 2007–2009 financial crisis began with a collapse in the mortgage business, notably subprime mortgages, it quickly extended across the economy. Worldwide stock markets fell in lockstep with US markets, producing a global financial crisis.

There was a surge in residential house foreclosures, as well as a significant rise in unemployment. The stock market crash was followed by the greatest economic slump in the United States since the Great Depression.

When the government adopted emergency steps and the Federal Reserve initiated Quantitative Easing, reducing interest rates to levels never seen before in history and flooding the economy with new cash, both the stock market and the economy began to turn around.

As catastrophic as the 2007–2009 recession was, it also marked the start of one of the most spectacular bull markets in history, from 2009 through 2020.

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4. From January 11, 1973, until October 3, 1974

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Decrease in percentage: 48.2 percent

20.7 month duration

This collapse was the worst in US history since the Great Depression, at least until the 2007–2009 crisis overtook it.

The accident was perhaps more difficult than most since it had several reasons.

The so-called Nixon Shock of 1971 was the first. In 1971, then-President Richard Nixon signed a number of economic and financial reforms. The most visible of them was the separation of the US currency from gold.

The dollar has always been convertible into gold at a predetermined price until that time. The Nixon administration ended the dollar’s convertibility, making it a floating currency. This weakened the dollar’s stability and sparked inflation.

A combination of economic contraction and the 1973 oil crisis exacerbated the market catastrophe, causing oil prices to almost treble in October of that year. The abrupt and severe rise in oil prices increased the broader inflation that was sweeping the economy.

A combination of depreciation of the dollar, an increase in the price of oil, and a prolonged recession resulted in one of the worst stock market collapses in history.

Image courtesy of Andrii Yalanskyi through istockphoto.

5. From September 7, 1932, until February 27, 1933

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Decrease in percentage: 40.6 percent

5.75 months in length

On July 8, 1932, the Crash of 1929 came to a conclusion. The stock market, however, was again in a crash position barely two months later. Perhaps the recovery from the prior collapse was just a bear market rebound. However, despite the severity of the collapse, the market never reached the depths of the last crash, hence this one is considered a different disaster.

Image courtesy of лекcе елоерски/ istockphoto.

6. From January to November 1907

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Drop in percentage: 40.4 percent

11-month duration

This disaster, known as the Panic of 1907, isn’t well-known among today’s investors. However, it might have been the worst crash that anybody had ever seen up to that date.

Bank stocks sparked the panic. Due to the economic downturn, there were bank runs as depositors sought to withdraw their funds from failing institutions. Attempts to halt the market’s slide failed, leading to an upsurge in bank runs.

Large banks failed as a consequence of the collapse, causing a contagion to spread throughout the nation. The Wall Street selloff spiraled out of control, culminating in November 1907.

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From 7. October 1939 until 28. April 1942

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Decrease in percentage: 38%

32-month duration

Since it started soon after Germany invaded Poland in September 1939, we may refer to it as the World War II Crash. The Dow Jones Industrial Average declined from 152 in October 1939 to 95 in April 1942, after reaching a high of 152 in October 1939.

Given the scope of World War II and the uncertainty surrounding its conclusion in the early stages, this was unsurprising. It lasted nearly as long as the Crash of 1929, which is not unexpected.

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8. From the 10th of March, 2000, until the 4th of October, 2002

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Decrease in percentage: 36.8%

26.8 month duration

This disaster, also known as the Dot-com Bust, is ranked #8 on the list, but solely based on the Dow Jones Industrial Average’s performance. The major damage, however, was done to the NASDAQ, which dropped by roughly 80%. According to the NASDAQ, the Dot-com Bust was the second-largest crash/bear market in US history.

The stark difference in performance between the Dow Jones and the NASDAQ, on the other hand, indicated two quite different markets.

As far as stock market collapses go, the Dow’s performance wasn’t very impressive. The NASDAQ, on the other hand, was in a completely different scenario. Much of this has to do with the peculiar character of the NASDAQ equities at the time.

Technology stock prices increased fivefold in the 1990s. In actuality, the boom period lasted just five years, from 1995 to 2000. Technology stocks were flooded with venture funding at the time. Almost every firm that promoted itself as being tied to technology in any manner saw its stock price skyrocket. Many of the stocks were losing money. It was a textbook example of a stock market bubble.

As investor funding dried up, the market started to fall. Selling begets more selling, and the slump became self-sustaining.

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9. From August 25 until October 19, 1987

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Decline in percentage: 36.1 percent

Time frame: less than two months

This is, in some respects, the most unique stock market meltdown ever. The Dow Jones Industrial Average roughly tripled from August 1982 to August 1987. However, during that same month, everything came to a screaming end. On October 19, the market started to drop gradually, then abruptly.

The Dow Jones Industrial Average fell 22.6 percent in a single day, marking it the greatest percentage one-day loss in history.

The market bottomed at 1738 on October 19 after hitting a record high of 2722 on August 25, 1987, for a total loss of 36.1 percent.

The causes of the collision are still being disputed, but the speed with which it recovered was really remarkable.

The stock market started to rebound almost immediately after that. The market didn’t completely recover from the crisis until the early 1990s, but it continued to rise after then.

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10. From February 19 through March 23, 2020

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Decrease in percentage: 34%

33-day duration

Based on the Standard & Poor’s 500 index, the market fell by 34% in just 33 days. Pound for pound, this might have been the most serious crash in history. But it was short in duration, and the market not only fully recovered within months, but went on to set a succession of record highs.

The COVID-19 epidemic, which was rapidly spreading over the globe, was the driving force in the backdrop. Governments all across the globe have shut down their economy because they have been unable to stem the spread of the disease. Not only was there a tremendous economic shock, but there was also a dramatic loss of faith in the financial markets as a consequence.

However, the Federal Reserve’s rapid response to provide further monetary support brought the slump to a close in astonishingly little time. Following that, the market continued its upward trajectory, as if the collapse had never occurred.

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Last Thoughts

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Finally, history and economics academics may benefit the most from this material. However, understanding that stock market collapses are perfectly common and part of the financial experience is beneficial to the ordinary investor.

The objective isn’t to be terrified of crashes, but to prepare for them on a regular basis. When they do, it’s time to think about the long run. All bull markets come to an end, and so do all market collapses.

What you do before, during, and after a collapse will be critical to a successful long-term investing plan.

Consider these 9 stock market alternatives if stocks and markets seem too turbulent for you as a beginner investor.

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