What Makes Stock Prices Change?

By | April 18, 2014

What makes stock prices change

Understanding the influences on the stock market might allow you to understand the principals of what makes the changes possible, could influence how you make your capital work and the companies in which you invest your money.

The basic concept of how stock prices rise is:- if the demand is high and the available stock or shares are low this raises the price; for stocks to fall the demand has to be low and the amount of shares available could be high, therefore more investors are selling than there are buyers to purchase.

What makes a company worth investing in?

Looking at a company you must be prepared to work out if it is a good investment. Is it popular in the press or has it had bad publicity lately? Bad press can push the value of the stock down; this is bad news and people automatically want to sell their shares. If on the other hand the news is good, maybe they have had a great quarter and their profits are up, this will be reflected on the stock market with a rise in the price of the stock.

Knowing when to purchase stock and when to wait is a skill that is learnt with time and practice. But there are more areas you need to consider before making any decision. You need to know if the company is going to fit into your investing plan, what sector you are looking at and the return that you hope to make.

If, after you have found a company that fits with your basic ideal, then you need to make a more detailed look at the company. You are, after all, putting money into the business, so making sure that its accounts and the balance sheet are favourable. Having a detailed plan that you use each time you research a company will mean you follow a strict guideline, ensuring that the company meets a pre-decided business check.

Knowing how the company has performed

Knowing how a company has performed in the past is no guarantee of their future performance. It can make it difficult to judge the potential of this company in the future, as with all investing it is a gamble, going on past performance is not a fail-safe solution. But often it is the only data that you have available and you then have to make a judgement as to the potential for the company in the future.

There are some companies that you might think will be around for years, and not bother with the research; this is not a great idea, there are older companies that are having problems like some of the less mature companies.

Therefore, it is vital that you understand the company before you invest any money and you are sure that you have understood the position that it is currently holding on the stock market. You might find that with research a company that seems good in principal, might not be worth the money in investing, if the company’s position on the market has shown little change over a period of time. There is more to investing than putting your money in a company and hoping for the capital to grow.

 

 

 

 

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