I like Sharesies. If it encourages people to get involved in investing, it can only be a good thing. But lately, I've seen a few people on the Sharesies Facebook forum make comments like "Why have my shares gone down????? 😞😞😞", as if it was somehow wrong or inexplicable.
As a more seasoned investor, I thought I would help the forum with some thoughts.
I've had the pleasure of being an active share investor for a number of years now, and I thought I'd add some food for thought for some Sharesies investors here, as I've noticed a few have been worried whenever there is a "down day", asking questions like "why are my shares going down?".
People buy shares for only one reason. Because people think they are going to deliver a superior economic result for them, mostly by going up in price or by paying a dividend. Not all people are equal though - when company insiders like management and directors buy shares in meaningful amounts, that's ALWAYS a good sign.
But shares can go down for many many reasons. Sometimes it's because there is widespread selling across the market due to an international incident. Sometimes it's because of a fund deciding to sell shares after holding for a while, and they need to drop the price to find buyers. Sometimes its because the stock is illiquid/thinly traded, and so the price needs to drop in order for smaller holdings to be soaked up by buyers. Sometimes the currency moving about can impact on businesses that import, whether that might be fuel, finished goods or raw inputs for manufacturing. Sometimes the shareholder has a specific need to sell that has nothing to do with the stock like paying out a divorce, buying a new car, paying off a mortgage or similar. Sometimes, the media make some kind of commentary that impacts on the company directly or indirectly. Sometimes people sell because they see a whole bunch of other people selling and they get scared. Sometimes, it's because the company makes an announcement that the market views unfavourably, and so people take their money out. Insiders might be cashing out because they have lots of shares in XYZ company, and need to diversify their wealth (and that's a sensible thing too).
So when someone asks, "why is company XYX going down today?", please realise that markets are made up not just of companies that are listed, but people who invest in these companies. And people can have motives for selling that have nothing to do with the company itself. In all probability, the company you invested in was doing the same thing last week as it was this week when its price went down.
So be cool.
This mini blog contains infrequent public commentary by Aaron Bhatnagar mostly on business, but also political and philanthropic matters of importance to him.