Why do stock market events cause stocks to go on sale?
Let’s say that cotton prices start to go nuts because of the Arab Spring. Maybe they’re not going to harvest Egyptian cotton crops, so cotton prices go from $1 to $3. The guys who own companies that depend on cotton prices to be low look at the price and say, “Oh no. It’s going to take over a year before cotton prices come down, I need to get out of this company.”
This happens even if there isn’t anything wrong with the company, it’s just going to have a bad year. That company could go from $45 to $15 simply because there are no big buyers. They all get out of the company on momentum. This is what causes stock market prices to change.
So, how do Rule #1 Investors take advantage of stock market events?
Rule #1 investors buy for the long term. They wait, and when they see something that’s on sale because the big guys have sold it off, it takes them just a few seconds to get in there and take advantage of these stock market events.
In this episode of the InvestED podcast, Phil and Danielle discuss stock market events more in-depth, and how to take advantage of when stocks go on sale.
Learn more about buying stocks on sale with the Four Ms Guide! Click here to get started: https://bit.ly/3hRUZs1
Topics discussed in this podcast:
- Stock market events
- How to find stocks on sale
- Uncertainty in the market
- Warren Buffett
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