You might have heard that we are about to get into a financial bubble, already in one or coming out of an economic bubble. This begs the question, what is a financial bubble?

This is one of the common terms you will hear when it comes to economies, financial or stock market.

History has shown that the phenomenon called a bubble does occur in the financial markets including the stock market.

It is good to note that you can only identify a financial or economic bubble in retrospect.

Knowing and understanding how a bubble works can help you anticipate it in the future.

This skill and information is important, as it would help you manage your money better.

If you have been wondering what a financial or an economic bubble is, then today you are in luck.

In this article, you will learn and understand what a financial bubble is. You will also get to know how it works in the economy.

Grab your cup of coffee and let us get into this.

What is a Financial Bubble?

In a nutshell, a financial or economic bubble is a period or cycle when the perceived prices of assets are higher than the true underlying value of the asset.

A financial bubble is usually characterized by increasing prices of stocks, real estate or any other asset to a point that is unsustainable.

When that happens, you then have a financial or economic bubble burst.

You can make or lose money during periods of financial or economic bubble.