Why did so many people invest in the stock market in the 1920s?

Asked by maham237 @ in History viewed by 318 People

Why did so many people invest in the stock market in the 1920s?
a) they felt it was safer to invest in stocks then in bank deposits
b) they had faith in the stock market because it was well regulated
c) they believe the majority of stocks were undervalued at the time
d) they could buy stocks "on the margin," so they needed less initial capital

Answered by maham237 @


The correct answer to the question is Option D) They could buy stocks "on the margin," so they needed less initial capital.

A lot of people invested in the stock market in the 1920s because they could buy stocks 'on the margin', and hence, required little initial capital.

'Buying on margin' means that you leverage an asset by borrowing money from a lender. This easy access to borrowing, fueled a growth in stock market investment, which eventually created a bubble and completely collapsed.

All this resulted in the worst US economic depression in recent history and the event is ingrained in the US socioeconomic history.


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