Why do stocks fluctuate?

This video explains the dynamic nature of stock prices and the factors influencing their constant fluctuations. It highlights the role of stock exchanges as continuous digital auctions, where stocks are electronically bought and sold every second. The concept of valuation is explored, noting that investors often consider a company's future potential rather than its current earnings. Positive and negative news events can significantly impact stock prices. Ultimately, a stock's price reflects what other people are currently willing to pay, but it's important to have your own assessment of a company's worth.

Why do stock prices change every second?
When you look at the price of a stock, what you're actually witnessing is the most recent price at which somebody has sold it.
This means if you sell an Apple share for $1, the share price of Apple for EVERYONE worldwide, would also be $1! For, a split second at least...
The stock market operates like a continuous digital auction, where shares are bought and sold electronically every second.
When there is a surge in demand for a company's shares, the price rises.
Conversely, if more people are selling than buying, the price declines.
All share prices naturally gravitate towards where the majority of investors currently believe it should be, and the higher the trading volume, the faster this adjustment occurs.

But companies aren't always valued on the money they're making NOW
Investors love to look ahead to the future!
Even the smallest piece of news today can shape investors' perceptions of a company's worth a decade from now.
It's like predicting a champion in the making.
Positive news, like a company announcing an exciting new product, can change the amount that investors believe the company will be worth in the future.
That belief leads them to pay more for its shares now.
On the flip side, if bad news strikes, like a company's CEO leaving unexpectedly, investors might think the company's future isn't so bright, causing share prices to drop.

When you purchase a stock, it's essential to always have your own assessment of what YOU believe that company is truly worth.
In the end, a share price is merely a reflection of what OTHER people are currently willing to pay and accept.
Your personal evaluation should guide your decisions.
But don't take it from me, I'm just some dude, take it from the investing wizard, Warren Buffett:

Did you learn something in this video?
You might be interested in this one minute guide to how capital gains tax works!

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