The Volatility in Share Market Fears Amateur Investors-An Pham Investment
- Viet News Digger
- Feb 22, 2020
- 1 min read
The volatility in stock markets is one of the principle reasons why private investors sell out at the wrong time and often fail to benefit from the natural appreciation in stock markets over time.
If you are to save and invest through the stock markets you must accept that volatility in markets is normal, and an understanding of why markets tend to be so volatile can alleviate many of the fears that you might experience when markets enter a volatile phase.
After all, volatility is not the same thing as risk, and if you succumb to volatility by selling out under pressure you may take a permanent loss when all you were experiencing was a temporary decline in values.
The principle causes of volatility are;
The economy is volatile and experiences periods of contraction as well as expansion. A contraction in the economy leads to lower revenues for businesses, and with fixed overheads this, in turn, amplifies the reduction in corporate earnings. Furthermore, stock markets are emotional and over-react relative to the likely change in these underlying business fundamentals.
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