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What Makes the Markets Move

Financial markets are constantly on the move, and those moves can have serious implications for what your retirement will look like. Still, most people don’t really have any clue as to why the markets move the way they do. They see it as some dark alchemy, or at best, essentially random. In the long run, though, that’s not quite true. We can look back and decipher why the markets moved the way that they did. Unfortunately, this understanding doesn’t do us a whole lot of good if we’re trying to predict exactly what will happen in the future. However, it is incredibly important for understanding how to get the most out of your retirement portfolio. Before we dig into that, let’s think about security prices. They are the market’s best estimate of the “true” price of a security, based on all the information available to the market. In other words, how much the marginal investor will buy or sell the security at1. Now, when I say all the available information, I really mean it. When people trade a security, they are aggregating everything that they know into the market, which means that the market is incorporating everything (save insider information) […]

Provided by: Retirement Researcher

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