The Challenges of the Market

The stock exchange market, along with the numerous companies that combine shares in the stock market, can be very unclear for a participant that has the desire of participating in it. Besides the hundreds of shares to choose from, there are also too many experts, analysts, brokers, and recommendations in the media that bombard the poor investor disorienting him with different points of view, many times which are contradictory. Most likely, those reading this have tried at least some of the following methods to try to have success in the stock exchange contention.

Buying stock from companies that are destined to grandeur
You have probably heard the stories about the stock that were worth a few cents a few years ago and that are not worth several dozen times their original value. Besides being anecdotic cases, the probability of discovering one of these shares and continue to hold them until they show their potential value, is really small. In each new area of business there will soon have been several companies competing, but finally only one or at the most two will be the leaders and the rest will end up being the average of the other sectors, if they are not worse. Statistics, on the other hand, show that within the first five years, seventy five percent of the new businesses do not work.

Buying popular stock
As a first time investor, one wants stock that is safe and has moderate profitability. It is very easy to allow ourselves to become tempted by shares or stock that most people are purchasing. The problem is that the very popular shares are generally overbought of too expensive, due to the great demand of the public and of the institutional investors. On the other hand, it will occur that, when it stops being the public’s favorite, its price will rapidly decline in the measure its demand and popularity of such becomes reduced. The shares will go down at a much lower price than they take to go up. The predilection of the public for a determined share changes frequently and therefore this method usually ends up leading to failure.