5 Ways A Stock Market Crash Can Hurt You Even If You Don’t Invest In Shares

What does the stock market crash into me when I don’t invest in shares?

A lot of people will be saying that they fall in the share prices of the world stock markets will make no difference to them, because they don’t invest in shares.

However, the value of the world’s largest companies indirectly affects everyone on the planet in one way or another.  

1. Confidence

The markets need the confidence to invest in new businesses and projects, which in turn provide jobs and prosperity. When markets are crashing and the value of companies is going down, there will be less money available to invest. A lack of confidence can ultimately lead to recession as people and businesses stop spending.

1. Investment

People assume that investment comes from governments, but in most cases it comes from the private sector. Even if the government do invest directly, where do you think governments get their money? 

1. Taxes

Government money is raised through taxes on companies, through corporation tax, income tax most of which is paid by people working for companies, expenditure tax and various other taxes such as capital gains and inheritance tax.When markets fall, companies will invest less, make less profits which means they’ll be less tax to collect by governments. This can lead to tax hikes or borrowing to make up the government expenditure shortfall.  

1. Takeovers and breakups

If the company’s share price falls below a certain level, it leaves them vulnerable to a hostile the takeover. In many cases, this will lead to job losses and closures as the new owners seek to maximise their short-term profits.

British companies have been subject to a raft of takeovers from foreign companies which, despite promises made, have often resulted in massive job losses when factories and divisions have been closed or moved abroad. Not all takeovers are directly the result of a stock market downturn, but it does leave companies weak and vulnerable to attack by predators.

1. Pensions and managed funds

Even if you’re not directly invested in the stock market, your pension, insurance or managed fund almost certainly is. It goes without saying that if the value of the shares, or equities, on the stock market goes down, the value of your pension will follow. If you are in a defined contribution scheme, the value will full almost immediately, which can have devastating consequences especially if you are about to retire. People in a defined benefit or final salary scheme may not be directly hit unless the fund starts to run short of funds.  

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