Stock market bubbles and crashes have evolved from a phenomenon known as the tulipmania of the 1630s and are two of the earliest recorded financial bubbles. A stock market bubble happens when a company’s stock is overvalued and investors wrongly believe they will get high returns on their investments. This leads investors to buy more of the overvalued stocks, resulting in a rapid increase in the stock prices. A stock market crash then occurs when the market significantly falls resulting in a large amount of investors losing money. This is usually caused by the overvalued stock prices dropping back to more realistic levels. This can be caused by a sudden decrease in investor confidence due to a major external event such as a recession or a war, or can be caused by the market overheating; when rising stock prices cause investors to think the market is invincible and to buy overvalued stocks, creating a bubble. When investing in stocks, investors need to consider the risks involved with t...