Coping With Stock Price Slides: the Armour You NeedIt's easy to be misled into thinking that once you invest in stocks, you sit back and watch their prices balloon steadily up, amassing you wealth without fail. Well, think again. It's more than that, even though there's no arguing that lots of money can be made in stocks. If you have decided to invest because you've heard or read about those 400%-in-one-year price appreciations and have castigated yourself for failing to see such powerful money-making opportunities before now, there are a few things you need to understand before you dabble into the market with a mistaken orientation. The market gives and takes. If, for instance, you moved into the market in the first two trading days of this year and loaded up stocks as prices zoomed up, believing that trend would continue and turn in millions for you even this January, you probably would have been gasping for breath as the market quickly reversed into a meltdown that saw prices cascading down in a stretch of four trading days. Possibly, you would have been cursing whoever introduced the idea of stocks or encouraged you to invest. Well, before you emotionally hurt yourself or take costly decisions, it's good to understand the fundamental nature of the market. Understanding the Market Secondly, it's in the nature of the market for prices to swing upwards and downwards, in both the short- and long-term. This is understandable, because investors are looking for opportunities. If prices are driving up, for instance, they'll keep buying, but it eventually gets to a point where a given investor thinks he has made enough profit from his investment(s) and doesn't want to risk a reversal of the price movement. He moves to sell and take his gains. If a large number reasons and acts similarly, that will impact on the market as there are many investors wanting to sell. The likely result is that prices slow or reverse for those volumes to be bought. That could trigger even more sales as more investors rush to take their profit. Prices would then begin to go down in a sustained fashion. Note again, however, that at some point, investors will reason, also, that this is now too low and an opportunity to buy. When many start buying, that firms up demand and begins to push prices up. Usually, these cycles run in the market, which is why prices swing up and down. That could benefit or hurt you, depending on when you move in or out. But most often, as you can see, it corrects itself. That's why you hear of 'market forces' working to control the market. Other factors may determine the direction of prices, especially of specific companies. Reported earnings, for instance, why may excite the market or fall short of expectation. Dividends (including bonus issues) announced, may impress or fail to impress the market. Reports of new business undertakings or product launches. New business relationships like mergers, acquisitions, take-over, etc, all of which investors can interpret positively or negatively. CBN or government policy measures. These and more, are factors that shape market disposition. When you understand the basic nature of the market and these interplays, it will help you to:
The Money Comes in the Swings
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