#1 Investing 101: Market Dynamics And Cycles
There is an unseen barrier of questions and suspicion standing between people and investing success. You will never have those suspicions again.
This is the first issue of our email investing course, welcome!
If you are a beginner, you will find answers to some of the fundamental questions about investing and the markets. If you are an experienced investor, I hope you will still find something to think about!
Headline From 1987 Market Crash
Can the stock market go to “0”?
It has never gone, not in 1929, not in 1987, not in 2000, not in 2008.
Master investors have confidence in the market and building that confidence is 50% of successful investing. We will start from here.
There is one good thing with investing:
“Nobody starts as a master investor.”
No matter what you are innately talented at, I have never seen any person becoming a master investor in their first year.
You may be the top engineer.
You may be an English teacher.
You may be a great quant genius.
It doesn’t matter. Market treats you equally. This is a huge advantage.
When you are starting out, the most important thing is building confidence in the system because for many people stocks are just tickers that go up on good news and down on bad ones.
The idea that you can understand it, reason about it and read it like an open book looks improbable. It’s not.
To build that confidence in the system, you have to understand the market dynamics.
I had the following questions in my mind when I first met with investing in the stock market:
What actually is the “stock market”?
Why does a share of stock have value?
Why can’t a profitable company go to “0”?
Why do we have price movements?
As I got older and saw many of my friends start investing and I noticed that they had the exact same questions in their mind.
I figured out that answering those questions helps you build confidence in the market, so I will start from here.
If you are just starting out your investing journey, by the end of this issue, you will have a fairly good grasp on why the stock market exists and how it works. This will be the groundwork for investing with confidence.
If you are an experienced investor, that will be a fruitful conversation for you where you may have a chance to revisit the basics and get your mind busy again with the fundamental questions.
So, let’s cut the introduction short, and start answering the fundamental questions.