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The three words that may be holding you back from investing in stocks

Finance

The three words that may be holding you back from investing in stocks

Most human beings are risk-averse by nature, and thus, we often tend to hold ourselves back from investing in the stock market, owing to the uncertainties revolving around it. However, we forget that by not investing our money, we are also losing on prospective returns that we could have earned by simply learning a little about the stock market and investing our money in potential stocks. Thus, before deciding whether to invest or not, we must familiarise ourselves with the factors which affect the stock market.

stocks

Factors that affect the stock market

  1. Supply and demand – If a firm is performing well and everyone wants to acquire shares, there will be a shortage of shares, causing the stock price to shoot up. Conversely, when there are too many shares available, but no one wants to acquire them, the stock prices take a dip.
  2. Investor sentiment – Stock prices rise if investors maintain a positive sentiment and invest actively. On the other hand, stock prices fall if investors maintain a negative outlook towards the market and prefer not to invest.
  3. Natural calamities – Natural disasters such as earthquakes and floods have a significant impact on stock market prices. Natural disasters cause failures in the manufacturing and transportation of goods, impacting sales negatively. As a result, stock prices are certain to decline when natural disasters occur.

The three words that may be holding you back from investing in stocks

The ‘fear of losing’ your hard-earned money are the three words that may be holding you back from investing in stocks. This fear is generally related to changes in the following factors:

  1. Inflation – Inflation is defined as a rise in the price of goods and services over time. Inflationary pressures deter investment and slow long-term economic growth. Stock market-listed companies may postpone investments and production, resulting in negative economic growth. A decrease in the value of money may result in a decrease in the value of savings. Stocks of luxury companies tend to suffer as well, as no one wants to invest in them. This has a negative impact not just on one’s purchasing power, but also on one’s ability to invest.
  2. Interest rates – When interest rates rise, banks raise lending rates, shooting up the cost of lending for both businesses and individuals. The increased costs will have an influence on the company’s profit margins, which will ultimately have an impact on the stock price.
  3. Exchange rates – When the value of the rupee rises, the price of Indian commodities abroad rises, resulting in lower demand. As a result, exporters suffer, and their share values fall. Importers, on the other hand, can buy items at lower prices, pushing their stock prices up.

Conclusion

If these three words are stopping you also from making an stock investments and appreciating your wealth, you can reach out to a financial advisor and break this chain of fear. An expert can help you plan your investments effectively as per your risk appetite and investment preferences.

Susan M. Davis

Tv expert. Proud web nerd. Friend of animals everywhere. Hipster-friendly coffee trailblazer. Spent college summers short selling clip-on ties in Hanford, CA. Spent two years developing jack-in-the-boxes for fun and profit. At the moment I'm merchandising human growth hormone in Prescott, AZ. Spent several years implementing birdhouses for the underprivileged. Had some great experience lecturing about spit-takes worldwide. What gets me going now is building chess sets in the aftermarket.

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