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What is Uncertainty?
Uncertainty doesn't have to be directly related with
just the stock or a fund, but could have to do with the environment. Example. Lets say you're looking at
fictional company 'XYZ', and XYZ, has in the past, grown 50
percent a year and is projected to continue that growth. Also assume that the market for
XYZ
products are very good- you might buy some of the stock.
Let's say you complete your research on XYZ and a CNBC breaking
news headline grabs your attention that says certain overseas countries
are talking about building their own XYZ plant. Now
they may or may not build that plant, but at this point there is some
uncertainty.
Throw in to the mix- Rumors that war is about to break out in another country
that heavily imports XYZ products, and now you have another uncertainty. The uncertainty can
be just about anything that could impact the companies stock directly or
indirectly.
That is the nature of being uncertain, you just don't know.
That's why the market can fluctuate violently sometimes.
It's like getting sick. If you get sick you begin to feel bad.
The worse sick you get the worse you feel. Once you begin to get better, you
probably begin to feel better. Same thing with stocks. The worse it gets for a
stock, sector, or the market, the more you stay away. Unless the uncertainty (sickness) is
terminal (Enron), at some point- it gets better. The less uncertain (the better you
feel) it gets, the better chance the stock, sector, the market will rise. At some point the stock, sector,
market (after enough selling) will find a base of support from which
prices rise, all other things equal.
If you have lots of time on your hands, you can track all of this
yourself and you can determine when it's time to get in- most likely it is when
you don't want anything to do with that stock, or the sector, or the market- is
when you should consider getting in.
Before you invest and How to invest
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