Common Stock Market Myths

The stock market is extremely complicated – all the more reason to jump in with your eyes closed. (Just kidding…) There are many aspects to the stock market that must be reasonably taking into account before investing, from buying and selling stocks, to stock market pricing.

Consumers often have some idea about how the stock market generally works, but few understand the mechanics of stock prices.

Complexity of the Process

Admittedly, it is tough to understand how the prices of stocks are set, as this is not something commonly addressed in typical discussions of stock market concepts.

Many wonder pause to ask what causes the more popular and successful stocks to trade for a low price, and why many unknown stocks are available for prices that seem extremely high. There are actually a number of factors that determine this.

High Investor Confidence Raises Price

Investor confidence in a company is one of the major determinants of the trading price of a stock. The level of comfort and positive anticipation investors have is largely borsa online based on actual performance – or even mere perceptions – about the future of the company and the value of its stock.

Shareholders receive quarterly financial reports covering the company’s performance. This financial information includes details on the company’s expenditures, sales, and earnings for that quarter.

Though such hard financial data is useful, it is not the only predictor of performance. Oftentimes shareholders make decisions based simply on what they believe will happen in the future, even if that belief is not centered on the company itself.

Decisions Made Based on Perceptions

The impacts of perceptions about the stock market are significant. They can actually sway the investing behaviors of stockholders more so than detailed financial reports and hard data. The opinions of economists and commentators about the company or even the financial world in general have a heavy influence on the price of stock.

If there are abundant positive rumors going around about the company’s performance, it is likely investors will lean toward purchasing stock from the company.

However, when there’s bad news in the air (pending war across the ocean, high unemployment reports, inflation rising, etc.), people tend to sell a lot more stock, driving the price down.

Supply/Demand of Stock

The higher the demand for a stock, the greater the tendency for prices to rise. Conversely, the trend for prices of stocks with a large supply of shares is typically to fall.

Apprehension (from real people) about different kinds of stocks and the hard data itself collectively determine the worth of stocks.

The Stock Quote

Stock quotes list the current prices and market trends for publicly traded stocks. The stock quote contains information about the company that aids consumers in their decision making process of whether to invest in the stock of a particular company.

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