These days, almost everyone has money invested in the stock market. Therefore, it is more important than ever to learn as much as possible about stock trends and what they can teach you. With that in mind, let’s take a look at three specific lessons that you can learn from various stock trends.
Following the Crowd may be the Best Strategy
If the market is trending up, you may be best served buying your favorite stock or a fund that tracks a popular index. If the market is going down, it may be time to sell or try to short the market until it shows signs of going back up. While there may be times of retracement during an up or down trend, you can generally tell by looking at the last 30 days what the market is likely to do in the next 30 days or longer. In some cases, the retracement period may be a good time to get better prices during an uptrend or sell your stocks without taking as much of a loss during a downtrend.
The Market Tends to go up over a Long Enough Period of Time
“Even though recessions may negate gains for a year or longer, the overall trend of the market is always up” according to ReturnStream. On average you can get 7 percent a year from stocks and 11 percent from stocks that have dividends. It is also possible for specific stocks to lose less money or actually continue to grow in value during an economic downturn. This could result in higher than average gains over a period of five or 10 years. Therefore, you may want to designate a few stocks to hold long-term that you will not sell no matter what may happen over the course of several months or a couple of years.
The Market is based mostly on Emotion
There is really no way to predict what the market will do. This is because the value of a stock or fund is based on nothing more than what someone is willing to buy for or what someone is willing to sell for. As investors may view different sectors, different pieces of news, or different company info differently, there is no real way to say with certainty whether a stock will go up or down or whether a trend will continue on a given day or completely defy expectations.
What the market has done in the past may have no bearing on what the market will do in the future. While you can use trends and historical data to make predictions, the best you can do is educate yourself and make investments that fit your personal profile.
