To many of us the stock market remains one very big mystery.We mostly have a hint of what it is but not the full understanding that should be vital for an investor. Of high priority then, at least to me, has always been the need to find simpler yet effective ways of explaining the complexity that is the stock market.
One thing that is obvious is that it’s a market like any other hence not exempt from characteristics that are common place in most markets. Meaning what influences the buy/sell decisions that participants in various markets make should relate to those in the the stock market. At least to a certain degree. For instance,have you ever posed to think of the similarities that exist between a market like Gikomba and the stock market?
Laws of Demand and Supply
In many markets, prices are normally driven by the laws of Demand and supply. When demand is high then prices also rise. When supply is high prices drop. Traders and consumers alike at Gikomba seem to understand this law too well. The traders use it to influence their pricing and what they stock while consumers use it to justify what they are being charged.
The stock market is no different but unlike prices at Gikomba the stock prices are driven by factors such as earnings of a company which can generate demand for it’s stock when reported high and Low prices when low earnings are reported.It can be hard to accurately predict by exactly how much a stock price would rise or fall but an understanding of the company fundamentals or detailed technical analysis should be of assistance.
Quality over Anything
Any consumer who is ready to spend money is normally concerned by one thing-quality.Different markets define quality differently but a general agreement is that it should be worth what it’s valued.
For instance ,a typical shopper at Gikomba normally does two things in quick succession to compare value to Quality-Here quality is determined by brand or worn or material of the item. First they inquire about the price, then check whether it matches the quality. If they think it doesn’t, they initiate a bargaining session; while if it does then it’s a good deal. Or they still bargain, just because.
This type of habit can be valuable for stock market investors since the stock market is no different. In the stock market quality stocks are determined by dividend returns or company fundamentals through analysing financial data to establish earnings,earnings per share,P/E ratios etc. A look at these factors can help you establish under-valued or over-valued stocks to influence the decision you make as regards to a certain stock.
Buy Low, Sell high
The best way to lose money is to sell an item at a lower value than you bought it for while selling higher gets you a profit, which is always a good thing. A Gikomba trader Normally has a fixed price for each item under which it would be impossible to sell for fear of loss.Likewise a customer who intends to buy items from them for resale has a price he expects to buy the items to earn profits after resale.
It’s not uncommon to find traders both on the buy side and sell side take such positions to profit from volatility in stock prices. Volatility being the small price changes in stock prices normally influenced by economic conditions or a Company’s performance amongst other factors. Trading is normally a good way to make money from a stock market, it calls for thorough monitoring of the market so as to know when to buy especially stocks that are valued lower while analysis indicates significant positive price changes.
Seeking Advice
Knowledge in anything you intend to invest in is valuable,so is insight coming from an informed individual.It has become quite common to spot a shopper in Gikomba accompanied by a friend whose advice they’ll seek almost in every purchase.The accompanying friend is normally informed and helpful in finding good deals.
In the stock market the ‘informed friend’ would normally be an investment professional with in depth understanding of how the market operates.Their advice comes in handy when it comes to making decisions concerning IPO’s,Rights Issues,sell of stock held,initiating a buy or picking winner stocks.You’ll definitely need one.
As I pointed out at the beginning of the article,to some extent,markets exhibit similar characteristics that influence buy/Sell decisions. So In case you’ve never had a shopping experience at Gikomba I’m sure you relate.