It’s very difficult to predict the crashes in the capital markets but we can sometimes predict the headwinds for near term and longer-term. People are having misconception that stock market runs on only with the money itself. Yes, money is the one through which you can either buy or sell. But there are different factors which drives the movement of stock market. Some of the crucial factors are:
* Country’s growth: This is why many of the investors invest in a particular market. India, China, Brazil, Indonesia. This are emerging markets which means this market is having a good potential to grow in the future with the developments. Country which grows better in the future, market of that country advances with the growth and provides a better returns to the investments on that markets.
* Companies Earnings: Better economy will lead to better growth in sector which ultimately helps in improving earnings. Companies revenues, profits and losses creates a better picture for investors. These things also gets reflected on the company’s prices for valuation.
*Management of the company: Better investors who knows business well they always believe in good financials. Financials are crucial part of the company and management is responsible for carrying on their own shoulders. Trust and Honesty with proper ethics will always give company a better image in the market.
Investment in the stock market is not simple and is not so hard. What we need to understand is the basic knowledge which helps to invest freely without any fear.
“Risk comes from not knowing what you are doing”- Warren Buffet..
Financial Economics 