Why do prices change?
A market price is formed at the meeting point between buyers and sellers.
Business results, expectations, interest rates and events can change demand and supply. Good news does not guarantee a rise: sometimes investors expected more. A chart shows what happened, not what must happen next.
A company earned more, but less than the market expected. Its price can still fall.
Open a chart and find a period of rising prices and a period of falling prices.
Investor.gov · Stocks ↗Check your understanding
A company reported a profit. Must its stock go up?
- Yes
- No
- Only if I bought it
Answer and explanation
No. Price is also affected by expectations and other factors.
What does a historical chart show?
- What already happened
- What will happen for sure
- Which stock is right for everyone
Answer and explanation
What already happened. A chart describes past observations, not a guaranteed forecast.
Continue learning
Risk: understanding what you can lose — Risk is the possibility that the outcome will be different from expected, including loss.
Diversification: more than one basket — Diversification is splitting investments among different assets and sectors.
What is a fund and what is an index? — A fund pools investors’ money and invests it according to a defined policy.