The Stock Market
Stock exchanges were originally conceived for public interest and had a clear public purpose to allow companies to raise equity from a large pool of investors and to provide a market for investors to later sell their shares in those companies at a profit, as the company grow and shares get stronger and higher.
The actual price of a stock is determined by market activity. When making decision to buy or sell, the investor will often compare a stock’s actual price to its fair value. For example, if a stock is trading at R30 per share and its fair value is R35 it may be worth purchasing. Conversely, if it trades at R30 but its fair value is R25, the stock would be considered overvalued and the investor would be wise to avoid it.
No country will grow without a stock market, therefore, we can be assured that the markets will always be part of our economy.
A rising stock market signals investor confidence, as buying activity pushes up prices.
When stocks rise, people invest in the equity market and gain wealth. Increased wealth often leads to increased spending, as consumers buy more goods and services when confident that they are in a financial position to do so. When consumers buy more, businesses that sell those goods and services benefit in the form of increased revenue.
Basically, consumers spend more during Bull Markets, because they feel wealthier when they see their portfolios rise in value. During Bear Markets, they pull back on spending, fearing the loss of wealth and purchasing power as the value of their stock decline. Stock Market losses cause wealth erosion. This reduction in spending negatively affects businesses, particularly those selling non-necessity goods and services, such as luxury cars and entertainment, that customers can live without when money is tight.
Remember the purpose the stock market serve is to give investors the opportunity to share in the profits of publicly traded companies in one of two ways: by actively trading shares (buy low, sell high), or to buy shares, (thus owning an asset) and earn annual dividends.
Like many things in life, the market moves in cycles. Some years yields robust gains, [2009: 28+ % return for S&P500], and years of choppiness and uncertainty [2017 with 3 financial ministers and uncertainty throughout 2018]. But with the bull market’s 10-year anniversary in March 2019, many investors recognize that the best days are yet to come.
Nobody cares about your money except you! I don’t care about your money. I care about my money – you care about your money. So you should learn how to manage it effectively for yourself. Anyone you pay to do that for you will probably do a bad job – because they care only about their money!
Due to a lack of financial education, South African private investors were always misled into trading shares when big, JSE linked corporations told them to.
C & K Moneyline changed that! We enabled the ordinary man to become an active, successful investor. We offer full market coverage, and anyone can become a client. You won’t get rich overnight on the stock market, it will take discipline, but you will take your first step to financial freedom!