If you're interested in learning about some of key influences which can affect a stock's price, simply continue reading to learn what makes the stocks go up or down.
As there are a wide variety of factors which can directly impact a stock's price.
Once you learn about the factors which can influence a stock's price, you'll be able to make wiser investment decisions. Instead of making rash decisions which are based on small dips or rises in stock price.
What makes stocks go up:
Supply and demand are the primary factors which influence stock prices.
- When demand for a stock is higher than the stocks which are currently for sale, its price will increase.
- While if there are more individuals who are looking to sell their stocks than interested buyers, the stock price is likely to fall.
However, there are a wide variety of secondary factors which can greatly influence stock prices.
Some examples of which include the results of annual reports, government policies, new industry regulations, new trade regulations and analyst upgrades or downgrades. Another major factor is the overall performance of the stock market.
Video: Why Popular Tech Stocks Could Be In Store For a 92% Meltdown - and the #1 Investment Billionaires are turning to now...
A Tech Minute special interview with Jeff Brown, America's most accurate technology investor. Mr. Brown recommended the #1 tech investments of 2016, 2018, 2019, 2020...
How a company's profits directly influence its stock price:
One key factor which influences a stock's price is the profits which its company generates. As usually when a company posts high profits, investor demand for its shares will increase. As healthy profits are often seen as an indicator of future success.
While inexperienced investors may only purchase stocks when they are cheap, more experienced investors will still invest in stocks at a higher price, if they believe that their profits are a sign that their share price will continue to climb in the future.
Inflation's influence on stock prices:
Another factor which can influence stock prices is inflation. Typically, the higher interest rates are or the higher the threat of rising inflation is, the more likely stock prices are to decrease. As many investors sell their shares in a panic, fearing an imminent stock market crash.
Whether inflation will have a negligible effect on the stock market or a huge effect on the stock market usually depends on the rate of inflation. As while small shifts in inflation will not have much of an impact on the stock market, drastic increases in inflation will normally have a substantial effect on the stock market.
Deflation's effect on stock prices:
Deflation can cause the prices of goods and services to decrease, which can decrease the profits which businesses are able to make.
Remember that the less profit a business makes, the more likely their stock prices are to fall. As profit is seen as an indicator of a business' potential for future success.
The effect of uncertainty on stock prices:
Pandemics, natural disasters, and wars can also have a negative impact on stock prices. As in times of uncertainty there are always more sellers than buyers.
For example, on the 16th of March 2020 the Dow Jones lost 324.89 points or roughly 12% of its value in a single day of trading. As a direct result of the uncertainty which was caused by the global Covid-19 pandemic.
If you're looking to pick up stocks from companies which you believe will be able to withstand uncertain economic periods, it's well worth purchasing them during times of economic uncertainty. If you are right and the companies which you choose to invest in make a full recovery, your stocks will increase in value.
Many investors choose to invest a large portion of their disposable incomes into blue chip stocks which offer competitive, regular dividend payments.
However, when a company's board of directors vote to decrease the dividend percentage which they pay their investors, there is a risk that their stock price will decrease as their investors may choose to sell their shares in favor of reinvesting in a stock which offers higher dividends.
Advancements in technology:
Companies which are responsible for significant advancements in technology often experience a dramatic rise in stock price.
While companies which are responsible for advancements in technology or a quick to get on board with new technology flourish, companies which are slow to adapt to new technology may lose market share and may experience a decrease in stock price.
Short term and long-term effects on stock prices:
It's important to note that some influences on a share's stock price will only have a short term effect on its stock price. While other influences may have a long term impact on a company's stock price.
As an example, new industry regulations may end up having a long term effect on a stock's price while a poor annual report may only have a negative effect on a stock's price for a few months.
As the company which presented a poor annual report may make major changes to their operations to improve their company's outlook.
While new industry regulations may increase a company’s production costs for the long term.
So, if you notice that a stock's price has been influenced by a specific factor, it's important to assess whether the change in stock price is likely to be a short term change or a long term chance.
As if you believe that a stock is experiencing a temporary dip, it may be a wise idea to purchase further stocks before the stock price increases again.
While if there are signs that a stock's dip in price will be a long-term change, you may want to hold off on purchasing further stocks. In order to avoid losing money on an ill-advised investment.
In conclusion, if you are keen to invest in the stock market in order to take control of your financial future, it's important to remember all of the key factors which can significantly impact individual stock prices as well as the stock market as a whole.
Remember that while a variety of factors influence stock prices, the most influential factor to consider is the current supply and demand of any given stock.
Over the years I've reviewed DOZENS of Investment newsletters. As a result of this, I've also spent quite a bit of time doing reviews of my FAVORITE Stock & Investment Newsletters, which you can read below!
- Profits Unlimited Review
- The Near Future Report Review
- Palm Beach Letter Review
- Palm Beach Confidential Review
- True Wealth Review
Both are written by experts at the VERY top of their game, and I've made good money investing on picks from both of them!