Yes, you can’t really predict the market. That’s what makes investing such a thrill or a constant headache, depending upon your mind set. Yet whichever mind set you endorse, there is no denying the fact that we all worry a lot about our investments if we have any as some of us worry about whether to take leap or not.
Like every mystery solved and unsolved, share trading basics revolve around some very simple and logical concepts. Hundreds of economists, share trading enthusiasts and market authorities all over the world spend their lives trying to understand and control these forces and having a head start may change the way you look at shares forever. Markets, here we come:
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• Shares: just one investment tool
Before you make any idea about share trading, you should be very clear about the fact that shares are just one form of investment tools. There are a lot of assumptions and economic factors attached to the trading and selling of shares. If you are not really comfortable with risk and return uncertainties of the product, it doesn’t mean you can’t investment to play the markets. It just means that you need to look for other commodities like investing in gold or government bonds. To invest and grow your wealth, you just need to know clearly what makes you comfortable and what doesn’t.
• Macro economy: we’re all a part of it
Don’t be afraid of the big term, it’s just the jargon the high and mighty of economics use to denote the entire economic condition of the world. For us, it’s the BIG PICTURE, the world economy.
a) What does Macro has to do with you?
When the global sub-prime crisis hit the global economy, we all paid for the consequence, didn’t we? That’s how Macro economy hits us, no matter where we are. Since our liberalisation in the early 90s, our economy is linked intimately with the global scenario.
Interest rates given by authorities like RBI form a big part of Macroeconomic forces. Depending upon the various lending rates, private sector banks and companies form their own policies and these, in turn, affect share market prices.
• Micro factors
A few days back, I was lusting after a fitness tracker manufactured by a company based in the US. When I tried to buy the product from an Indian online marketplace, the price was even higher than what I would have to pay if I ship the product from the US.
This is a classic example of supply and demand. As the fitness tracker is not available in India, people selling them online on Indian websites are charging way more than, well, they should, from a consumer’s point of view.
The fitness tracker example teaches this lesson: when the supply is restricted or less than the demand, prices will be high. Therefore, one needs to buy at low prices and sell when the market’s up.
Trading shares is an excellent and alluring way to increase your wealth. If you educate yourself and apply a little bit of common sense, there’s no reason why you wouldn’t be a successful investor.
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