Stock prices are determined by supply and demand; because prices reflect all known information a mispriced security cannot be known in advance. Take every single investor in the stock market universe; they are all doing technical analysis, fundamental analysis, following the advice of a broker, listening to a friend with a hot stock tip, throwing darts at board with ticker symbols on it, etc. – they are doing anything and everything to form an opinion about a stock.
the right way to invest blog
“The only stock price pattern is randomness; you cannot predict the future price movement of a stock (and no one else can either)” Stock prices are determined by supply and demand; because prices reflect all known information a mispriced security cannot be known in advance. Take every single investor in the stock market universe; they are all doing technical analysis, fundamental analysis, following the advice of a broker, listening to a friend with a hot stock tip, throwing darts at board with ticker symbols on it, etc. – they are doing anything and everything to form an opinion about a stock. All of those opinions get priced into each and every stock. So when you pick a stock because you think it is underpriced and it will go up in value more so than the entire market you are wrong and you are fighting an uphill battle. You have to understand you do not know any more than anyone else; you do not know more than the stock picker doing the same analysis or opposite analysis as you. The most accurate price of a stock is what that stock is trading at right now; know that market prices are the best estimates of value, price changes follow random patterns and future news and stock prices are unpredictable.
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connectauthorMichael Pensinger, CFP® is Owner and President of Pensinger Financial, Inc.
He grew up in Park Forest, Illinois and now resides in Lemont, Illinois with his wife, two children, and two dogs. Michael is actively involved in his community; coaching kids' sports, having served as Treasurer for the Lemont Area Chamber of Commerce Board of Directors, sitting on the Board of Directors for Hope & Friendship Foundation, and volunteering for the Lemont Heritage Woodland Sanctuary Open Space Committee. Read More Archives
January 2021
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