What are the characteristics of the stock market?

There are two kinds of investor who will never make money is market, investors who don’t know anything about the market and the investors who know everything about the market. Investors who invest their hard-earned money in the market without having knowledge about the stock market often pay a high price for their mistakes. The most common problem among new investors is, they think that it is very easy to make money in market. The sad thing is, all new investors, in the beginning, become very much overconfidence about their own ability to make money in market. this overconfidence sometimes leads them to invest lots of money and lose it all in one go. Only after these incidences, the beginner investor would appreciate that it is not easy to extract money from market. The moment we realize the fact that the market is supreme and making money is not easy, we grow as an investor.

Characteristics of Stock Market

  1. Market is supreme

In the long-run market is always right. The market has become a place for regrets. When the stock prices go down investors regret their decision on investing in the company and when the stock prices move up, then again, they regret not buying a greater number of shares of the company. This emotion of regret is widespread among many investors.

  1. Market punishes irrationality

Irrational investors have no place in the market. Sooner or later the market will throw them out of the path. All great investor has one thing in common, they have a rational framework in approaching market. The only way to survive in the market is by having a rational mind. In simple terms, rationality refers to making decisions based on facts and risk associated with it but not based on emotions.

  1. Market rewards patience

Patience is the master key to unlock the potential wealth in the stock market. Investors who are rational and patient become rich in the stock market and the rest of them are left behind. Warren Buffet famously said,” Stock market is the machine which transfers money from impatient investor to patient investor.” Invest have to digest the fact that, the market may test our patience to the core before rewarding with money. Only those who pass the test of patience are destined to become rich. Believe it or not, only very few investors pass this test.

  1. Market is the Master

Market teaches us every day but unfortunately, only a few listen and learn from it. Making mistakes in the market and learning from it is one form of learning from the market. We have an investor should approach the market as a good teacher, who is willing to teach us all the wisdom about investing but unfortunately, most of the investors are not willing to learn from the master.

  1. The market has no emotions on you

We may have emotions on our portfolio companies but the market has got no emotions on investors. The market doesn’t even care who have invested and how much money is invested in your portfolio. Market care only about rationality. The market says only one thing,” Either be rational and patience or else I will kick you out”.

In the short-run market is dominated by sentiments and many technical factors but in the long run, fundamental dominates the market. It is necessary for an investor to have emotional stability in order to survive in the market. In reality, only a few people have the emotional stability to stay in the market and this is the precise reason for having only very few people getting wealthy in the market. emotional stability is the secret for stock market success.