Have you been thinking of getting into investment or the stock market to be precise? If so, then you probably hate losing money as well, and that’s why you’re considering stocks. You want to have something more for your future.
So, if you’re thinking of the stock market, you have to be on the know. It’s not all rainbows and candy there; you can make huge losses in the market as well.
But first of all, you need to know the basics of the stock market for you to maneuver smoothly once you get in.
What Is the Stock Market?
First of all, you can’t get into anything before knowing a little bit about it, right? So, what’s the stock market, really?
Many people have all kinds of assumptions about how the stock market works. We associate it with how it’s portrayed in movies – a bunch of Wall Street big wigs running around a crowded room. But in reality, it’s a bit different for the layman.
The system is considered complex to many and hard to put in a few words. Some will put it as simple as a system where the publicly traded shares of companies are sold, bought, and issued. To the naïve ones out there, the market is like a gambling platform. But that’s just naivety’ in gambling, you can lose it all with a wrong bet, while in the stock market, it is rare to lose all you have put in.
What Factors Drive the Market?
In other words, what makes the stock prices go up and down? There are a lot of contributing issues that will make a stock’s price either rise or fall. For example, political unrest in a country will likely drive the prices down.
This is because the country at that time isn’t suitable to conduct business. But other factors will drive stock prices, such as disasters, social unrest, supply, and demand, etc. In simplicity, if there are many more sellers than buyers, then prices will go down, and vice versa.
Difficulty in Predicting the Market
- First of all, stock valuation makes it hard for anyone to predict the market. This means that the activity in the market will determine a stock’s value. If there isn’t movement on a stock, then the price will not be high.
- The second reason is a natural event. Who knows when the next hurricane will hit? Yes, that’s a bummer, but that’s how the market is.
- Human emotion is the third reason. Remember that less activity will keep a stock’s price from gaining. Well, here’s how the activity starts. If you want to buy a stock, chances are you’ll look at all the variables first. Then, right before buying, your emotions will decide. For example, is this company ripping people off? How does this look? You’ll think of things like that.
It Is an Adversarial Sport
Simply put, when you lose, someone else gains, and when you win, someone else loses. There are virtually millions of investors in the market every day, so you can’t expect to always win. Remember that for every stock you offload, someone out there is willing to buy.
Best Times to Buy and Sell
When everyone is optimistic that the value of the stock will not go down, that’s the best time for you to sell. And when all odds are stuck against you and everyone is pessimistic, then it’s your time to buy. In the stock market, at times, investing in companies that are going down is actually a prudent move. When it all stabilizes, you’ll reap the benefits.
When you get to know the basics of the stock market, getting into it will be much easier. Just do your homework and keep these five basics at the back of your mind.