What causes investors to buy or sell shares?

Question: What causes investors to buy or sell shares?

Always remember that in every trade, there is a buyer and there is a seller.

Generally, the buy and sell actions can be said to be governed by two basic elemets - "HOPE" and "FEAR".

People buy shares because they "hope" to make money. Similarly, people sell shares because they "fear" that their share prices will tumble.

"Hope" is normally centred around a country's economic performance. When there is "hope" of an economic expansion, share prices will rise in anticipation of the said economic upturn. Perhaps, the reason being, during an economic upturn, companies will make or are expected to make more money.

"Fear", on the other hand, is associated with unpleasantness in situations such as recessions, political crisis or social unrest. All these tend to create a sense of fear among market players thereby causing them to sell their shares. The fear of inflation or high interest rates have made market players rather jittery. The latest global financial and economic meltdown have similarly caused a worldwide selling in the stock markets.


Mind of the Market Player

Economy good? Bonus issue? ====> BUY

Recession? Political uncertainty? Riot, inflation, higher interest rate? ====> SELL


Reference: Making Mistakes in the Stock Market by Wong Yee