What is Equity Market?
An equity market simply means a market in which shares are issued and traded, either through exchanges or over-the –counter markets. It’s also known as the “stock market”, it’s one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.
What to do in uncertain times? Stick to equities but selectively and carefully. The stock market has a lot of uncertainty currently, and the reason for this is it’s really been a long time since the market had a downturn. Stocks in the country are really high in terms of evaluations and people on TV keep talking about the stock market will fall, so it makes people nervous, pondering where to stick their investments to. It’s highly recommended that investors should continue to invest in the stock market, but just taking more time to make decisions, and must be selectively and carefully.
The reason is that, investors need to understand that volatility is inevitable, and attempting to navigate around it is more risky than it can be imagined.
Recently, when you turn on the television or radio or on social media, you might assume volatility is a terrible thing requiring all investors to nerve and make changes to their portfolio immediately. When movement in the stock market is up one day, noticeably down for the next week, then appears to be traveling upward again, only to spiral downward again, that’s all about stock market volatility.
But it’s important to understand that this movement as it were is not all bad for investors. Making the right decision is what matters.
Stock valuation. The actual price of a stock is determined by market activity. When making the decisions to buy or sell, the investors will often compare a stock’s actual price to its fair value. For instance, if a stock is trading at $40 per share and its fair value is $45, it may be worth purchasing. Conversely, if it trades at $40 but its fair value is $35, the stock would be considered overvalued and the investor would be wise to avoid it.
So, when is the best time to buy and sell? The most important decisions and investor will make are when to buy and sell. The best time to buy is when others are pessimistic. The best time to sell is when others are actively optimistic. When buying , remember that the prospect of a high return is greater if you buy after its price has fallen rather than after it has risen. But caution should be excised here. For example, after the stock of fictitious company A declined by 20%, %35 or more than, the first question to ask is why.
Why did the stock fall as it did? Did other stocks in the same industry experience a decline? If so, was it as sever? Did the entire stock market fall? If the broader market in the same sector performed relatively well, there may be a problem specific to company P. It is best to adopt a buy or selling discipline and adhere to it.
Have a plan in place outlining your goals, objectives and time horizon before you need it, and review it regularly to ensure it serves you well during all types of markets. This will help you navigate through periods of uncertainty times when many people are panicking or acting out of fear. Once again, volatility is not all bad, as long are you prepared to take advantage of the unique opportunities it brings.