The 2010 Flash Crash was a sudden stock market crash that occurred on May 6, 2010. The Dow Jones Industrial Average (DJIA) fell by over 1,000 points, or around 9%, in just a few minutes. Other stock markets around the world also experienced similar declines. The cause of the crash is still not fully understood, but it is believed to have been triggered by a combination of computer-driven trading and human panic.
This event highlights the importance of diversification in investment portfolios. Although the stock market eventually recovered from the crash, investors who were heavily invested in stocks took a significant hit. By spreading investments across different asset classes, including stocks, bonds, and cash, investors can help protect themselves from major losses in any one market.
It’s also important to remember that stock market crashes are relatively rare events. Although they can be scary when they happen, investors who stay calm and disciplined usually end up being rewarded over the long term.