Stock Prices: How stocks derive their price
Stock prices get their assigned figures by way of different combination of occurring and recurring factors , which inherently affect the stock directly or indirectly. Most analysts can never peg a certain determining factor that can dictate how a certain stock price is set. Stocks serve as reflectors of a company’s performance and expected growth. Companies which have foreseen tendency to increase their earnings in the future have stocks whose prices tend to scale up.
When to invest; guidelines
Experienced investors know what stock to buy and if the price suits the stock. Their decisions are not determined solely by high prices and the current market expectation. They check the stability of the stock and the future expected earnings. The financial state of the company and future growth are also fundamental to the investor who is in to invest wisely and make good profits. These are some of the factors but the price of the stock has to be right and if not they look for alternative stocks to invest in and are not swayed in because everyone is buying it.
The price of stocks may be higher today and fall on the next day, at the end of the day there are some factors in the market that no one can predict. They may impact your stock positively or negatively. These could be an industry or political news that may have people worried or rushing to invest .Some of the factors are totally surprising and unpredictable, change in the energy sector like the rise and fall of fuel prices or the addition of another fuel source affects the market. At the end of the day, it’s what the investor will be ready to give to buy the stock
Fluctuations in stock prices
When the price of a stock rises more people buy it hoping to gain as the prices will be expected to continue rising. As the prices rise further pressure increases and speculators will buy the stock hoping to sell the shares after sometime higher than they bought them and make easy profits within a shorter time. When the pressure cannot be controlled the prices may start to drop. Most investors as soon as they notice the drop will quickly start selling their stock to avoid reducing loss if the shares would fall .This in turn would further lead to falling of the share prices in the market.
The stock market also is determined by the current interest rates. High interest rates worry investors due to foreseen drops in economic activity with more investors pulling out to have other investments that are not going to be much affected by the interest rates. Low interest rates increases economic activity encouraging high stock prices because borrowing becomes cheaper.
Investors can assess when to invest , even after considering all the factors and presuming it is the right stock , right price and even the timing. This may still not be enough because other factors that are not rational may appear. Investors over time will develop technics that will help them when investing in stocks.