TIPS FOR INVESTING IN STOCK MARKET
No one likes to lose money because the burn is greater than it is with others. If you’re considering an investment in the stock market and the thought of a loss capsize you, you probably shouldn’t invest. However, when you invest there are several things you should know to increase your chances of winning. Although there are many details it will help you understand the basics of how the stock market works and why stocks react. Let’s administer with the mystery and take a look behind the cloak.
About Stock Market
The stock market is a complicated system where shares of publicly-traded companies are issued, bought and sold. For some people it is cloudy and dark where people gamble. Actually, it is not gambling at all. Let’s say you put Rs. 100 on one roll of the dice. If you win, you win something. If you lose, you lose the entire Rs. 100. When you invest in stocks, you will win money or lose money. It’s rare to lose it all, unless of course you invest in a company that ruptures. You could say that the stock market is a group of people pitting their skills against each another.
The Stock Market is a Hostile System of Trading:
The stock market is a collection of millions of investors with diametrically opposing views. This is because when one investor sells a particular security, someone else must be willing to buy it. Since both investors cannot be correct, it is an adversarial system. In short, one investor will profit and the other will suffer loss. Therefore, it’s important to become well versed on the investment you are considering.
Stock Prices going up and down:
There are many factors that determine whether stock prices rise or fall. These include the media, the opinions of well-known investors, natural disasters, political and social ferment, risk, supply and demand, and the lack of or abundance of suitable alternatives. The compilation of these factors, plus all relevant information that has been disseminated, creates a certain type of sentiment (i.e. bullish and bearish) and a corresponding number of buyers and sellers. If there are more sellers than buyers, stock prices will tend to fall. Conversely, when there are more buyers than sellers, stock prices tend to rise.
Difficulty in predicting stock market:
Stock prices have been rising for several years. Investors realize that a correction will come and stock prices will tumble. What we don’t understand is what will trigger the selloff or exactly when it will occur. Therefore, some investors will sit be holding cash, waiting for the right time to get in. Those who are willing to assume the risk may jump in because the return on cash is so low and it hurts to earn zero while watching stocks move higher.
This begs a couple of key questions. If you’re on the reserve bench, how will you know when to get in? If you’re already in, how will you know when it’s time to get out? If the stock market was predictable, these questions could easily be answered. However, it is not. There are actually three issues an investor should consider. The first thing to understand is the point at which stock prices are fairly valued. The second issue is the event that will cause a downturn. The final issue is the human decision-making process.
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