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Why most people don't understand how the stock market works

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The stock market is often driven by fear, which can lead to significant downturns and volatility. Fear can cause investors to sell off stocks quickly, seeking safer assets like money-market securities and stable-value funds, even though this might not be the best long-term strategy.

 

However, one-year returns tell investors very little. Vanguard founder John Bogle once wrote, "Reversion to the mean is a rule of life in the investing world." He compared the phenomenon to gravity. An index may outperform or underperform its historical average during certain periods, but performance is typically pulled back to the average over time.

to the title ...

 

Most people could care less about the markets, as most are not invested in them.  Those that are in and successful, obviously know how to read the market.

 

Though that lose money, oh well :coffee1:

 

Like anything, one should actually know what you're doing ... before attempting to do it.

I like sinking my money into companies that actually make stuff.

 

$hxtcoin, on the other hand, is driven by computer fans and A/C rooms I heard.

 

Also pretty easy to crack for N.Korean hackers.

 

 

Nobody knows how the stock markets work. That's because reality is too complex and difficult to predict.

 

Trading in stocks is akin to gambling, but it's not the same, you can get information that will give you an edge, you can effectively become the casino, ie the party with the advantage.

 

However, as the OP pointed out, the markets also work on emotions, it is very hard to predict. The British treasury famously tried to bet against markets and lost. Nobody can fathom and predict the market truly. You can get lucky or you can make good bets consistently. That's about it. But you can't understand how it truly works. That would be like saying you can understand how "women" work. 

42 minutes ago, BritManToo said:

Because it's gambling, and I like keeping my money.

There is casino gambling where the table is angled highly against you and the more you play, the more you will lose. 

 

There is an aspect of the stock market that can be like gambling, but if you play something like an index fund over a long period of time, the table is definitely slanted in your favor. Just look at a 50 year chart of the S&P 500... 

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