What affects share prices?
When you buy shares in a company, you are buying a part of that company. The success or failure of your investment is partly due to how well the company is run, but also to general market conditions and analysis of other market factors.
You might invest in a highly successful and well run company that produces one particular resource. If demand for that resource drops, or supply increases, there’s a good chance those general market conditions will affect the price of your shares.
It’s also possible for whole sectors of companies to be affected by general market conditions. If the demand for resources dropped significantly, resource companies would be affected. This would also have a spin-off effect on companies who regularly conduct business with resource companies.
There are so many factors at play when determining and completing an analysis for the price of shares. It’s also important to remember that prices can change on a daily basis due to events that are impossible to predict. Changes in the value of currencies, natural disasters, flu outbreaks and even the release of information noting the resignation of a successful chief executive can have an effect on share price.
It’s important that you decide how much knowledge you need to be comfortable investing in a company. If you need detailed, professional analysis you might be better off talking to an expert. Many people however, are comfortable investing with a broad general information gained from reading the financial media and other sources of market education.
Learn more about Markets
Did you know?
Understanding financial market performance is an important part of learning about investing. You need to be able to make informed judgements about your investments so you can regularly review your investing strategy.
There are a number of different types of risks that may affect your investments. Understanding these risks, how they work and their potential impact will help assess your own attitude to risk.
