Why you should not follow the News Recommendations for Buying and Selling?
The changes in demand and supply of products and services cause the stock prices to fluctuate. However, the demand and supply change is based on the current happenings. News thus has a major role to play in determining whether a stock price will rise or fall. Everyone new to stock markets wishes to make huge gains quickly. However, in a rush for quick money, they fail to get their fundamentals right and look for ‘trustworthy advice that can help them grow their money. Most people regard news channels as one of the most credible sources of information and advice. Are you an individual investor wondering if sticking to the news channels will help you book huge returns? While news anchors and YouTubers teaching day trading may vouch for this approach, chasing the news may not be a beneficial stock-picking strategy. It is probably the quickest way to wipe out your capital. The number of channels showing everyday market reports has increased significantly. Each of them has an expert boasting vast experience in investment advisory and stock markets. While you can trust them for timely
reporting, it is in your financial best interest to ignore their advice on stock picking. The success of professional traders may be a misleading parameter here because they base their strategy on anticipated events and not the reported ones.
How does news affect stock markets? On hearing some bad news about a company, the usual reaction of investors is to sell their stocks. This includes a drop in revenue, issues with corporate governance, ripples in the economic and political landscape, and other unfortunate events. When more people sell stocks, the prices go down. Positive news, on the other hand, motivates investors to buy stocks, driving the prices up. This includes better revenues, new product announcements, acquisitions and mergers, and other positive signs. Often, bad news may have different effects on stock prices for different brands. A natural calamity or instance will negatively affect utility stock prices but positively affect home improvement brands. This is because more people will opt for home improvement services in the months following the calamity. Contact us on our website to know more.
The truth behind news recommendations Most news channels offer portfolio management services to their clients. Their subscribers profit when there is a sudden surge in demand for a certain stock in their portfolio. News channels drive this temporary demand by recommending such stocks through their channel. While this strategy can get profits for their subscribers – and short-term benefits for you – there would rarely be any significant long-term gains.
If not news based buying and selling, then what? Are you a beginner in the investment space? Has this article worried you? Wondering whom to turn to for the right investment decisions, if not the news recommendations.
As more people understand the scam behind news recommendations, investors are moving to strategies that involve algorithms and machine learning. It is time for you to understand the fundamentals of markets and stay away from news recommendations, especially if you are seeking long-term returns. While it may not be wrong to hear analysts and their thought processes, it is always better to do your research. Learn how to carry out the fundamental analysis of a stock and make it a habit to carry out the required analysis before you invest. To learn more on how to do this, read our A-Z guide on analysing stock fundamentals on the Teji Mandi blog.