You must have often heard that it is great to invest in stocks because it ensures you steady money. However, if you are a novice, you may not know about the fact that the stock prices are vital to make or break your fortune. There are a number of factors that influence stock prices. Read ahead to know more about these factors in details. While the elements can be company specific, they also have the potential to be environment specif. With both these categories at play, you need to make a detailed study before investing.
- Performance of the company and news related to it: The performance of a company is vital in determining the stock prices. The news that is related to the company about elements such as profits, the introduction of new items and services into the market as well as anticipated turnover, influence the stock prices. In fact, the layoffs of the employees as well as any change in the management or the core team of the company cannot be neglected wither.
- Performance of the industry as a whole: Now, you may be thinking that how does the performance of the industry make a difference to you. Well, you just read about company specific situations. Now, put that in a larger frame. This means that any negative publicity or bad news about one company can prove to be beneficial for another company. Though they may be operating in the same industry, there is constant competition on a personal level and every company wishes to go ahead and be a leader in its sector. Thus, the industry also matters in the long run.
- Sentiments of the investors: Investors are those without whom your company would actually cease to exist. It is their thoughts and trust in you that can make the stock prices go up or come crashing down. The bull market is a very strong market in which the prices of the stocks keep rising. On the contrary, a bear market refers to a condition when the prices of the stocks are falling at an all-time high speed and the investors have no faith left. While the initial one is associated with a period of economic boom, the latter is known for recession and high rate of unemployment.
- Economic elements: Lastly, economic reasons can be many. Some of the most important ones are inflation, the value of the nation’s currency, the changes in the economic policy that are made by the nation’s government and instances of inflation and deflation. These are all factors which have a direct impact on the working of the company. If the functioning is affected at even one point, then the stock prices suffer changes which can be good as well as bad. Please note that no element works alone. Everything is connected to one another and that is why you can witness a sharp domino effect in the corporate world.