If you’re interested in investing but the constant twists and turns of the stock market are giving you cold feet, you’re not alone. It seems as if every other day we’re hearing about major lows in company stock or celebrating market highs. Fluctuations in the stock market can definitely have an impact on your investments, but when it comes to investing, focusing on long-term growth over short-term gains is the way to keep anxiety at bay.
What Is the Stock Market?
The stock market is a marketplace where people buy and sell a percentage of ownership in a company or business (otherwise known as stocks). When people refer to the stock market, they’re more likely referring to one of the many stock market indexes, like the S&P 500 (Standard & Poor’s 500) or the Dow Jones Industrial Average.
The S&P 500 is a stock market index made up of our country’s top 500 largest companies. This is where you’ll find a listing of how our nation’s top-producing companies are doing financially (like Google, Amazon, Apple, Tesla, and more). In addition, many people visit the S&P 500 to get a sense of how the stock market is doing in general.
The Dow Jones Industrial Average is the oldest stock market index and tracks the 30 largest companies across all industries with the exception of transportation and utilities.1 Many economists use the Dow Jones as the measuring tool for how our economy is doing in certain seasons.
What Is Fluctuation?
Fluctuation is when a particular stock’s price goes up or down. Fluctuations in the stock market can happen on a daily basis because of supply and demand. If there are more buyers looking to trade, bidding wars can increase the price of the stock. And if there are more sellers than buyers, that decreases the price of stock as sellers try to lure buyers in for a trade. Much of the market (and whether someone is willing to buy or sell) is based on the amount of confidence people have in the marketplace and their investments as a whole on any given day.
Why Does Fluctuation Happen?
Like we said earlier, fluctuation in the stock market is common and happens on a daily basis. The price of a stock can rise and fall depending on how confident a buyer or seller is on a particular day. The confidence consumers have is determined by a variety of factors:
- the economy (and whether we’re in a recession or not)
- national security (is there a war happening?)
- inflation (how much are people willing to invest?)
- concerns about the market (is it on a high or low streak?)
- weather
- new government laws or regulations
- and more…
How Should I Approach Fluctuation With My Investments?
Knowing when to buy and sell in the market can be tough, but basing your investing moves on fear or market volatility is one of the last things you want to do. We get it: it’s hard to stomach the idea of losing your nest egg when stocks aren’t performing. That’s why it’s important to keep a long-term mindset when you’re looking at the market. Making a rash decision with your investments could hurt your financial portfolio in the long run.
We don’t want you to have to make investment decisions alone. Consider asking a seasoned financial advisor to help you navigate the market. A SageSpring Wealth Partner would love to walk alongside you and help you invest your hard-earned money in the places that will grow your wealth for the future. Reach out to an advisor today.
Any opinions are those of SageSpring Wealth Partners and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Past performance is not indicative of future results.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. You cannot invest directly in an index. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Index returns do not reflect any fees, expense, or sales charges. Individual investor’s results will vary.
