The stock markets work on a fairly simple concept. When a stock is bought, its price rises. When it is sold, the price falls *. This is why when you look at the stock price graph of a company, it is never smooth. It rises and falls unpredictably.
This abrupt unpredictability of a stock is a result of people selling their stocks. It is a common tendency in the stock market to buy stocks at a lower price and sell them at a higher one. This transaction causes a profit to the individual investor. But the sold stocks lower the price of the stock causing a decrease in profits for those who are still invested in the stock. So if the previous seller had never sold his stock for individual profit, everyone including himself would have a potential for higher profits. New investors buying the same stock would increase the stock price further. There would be theoretically no chance of the stock price decreasing. So if everyone bought the same stock without selling it, everyone would maximise their individual profit. No one would incur losses at the hands of unpredictability.
If no one sold any stock or sold it after a long time, the stock market would be the safest bet to park your savings. In reality, The stock market is actually the riskiest investment exactly because of its unpredictability. Most investors, in reality, do not think of maximising their profit. They think of quickly cashing in as much as they can. In a bid to get very rich very quickly, they lose patience. They sell their stock as soon as they make sizeable profits and hence put a foot on profits of others. This brings us to a lose-lose situation. Those who profit lose out on the bigger profits and those who incur losses, lose out because of the impatience of those who profited.
In conclusion, my point is that if we all are patient together, the more we’ll reap from the stock market. Patience is profitable ( for all )
- * – This is an over simplification but works well within the scope of this article.