Always Possessing Two Faces: Soaring and Plummeting

If everything went according to the textbook, there would be no problems. However, reality is often the opposite, especially when it comes to stocks.
Generally, the main factors forming stock prices are corporate performance, financial conditions, foreign investment, exchange rates, prices, and interest rates, all interacting to determine the day's market.
However, if stock prices were determined solely by these fundamentals, stock investing would be a worry-free and enjoyable pursuit.

The reality is far from that simple; the stock market is a cauldron of anxiety. It's not a matter of mild ups and downs, but can lead to profound tragedies that engulf families.
What happens when someone who truly cannot afford to lose plunges into stock investment?
I suspect I am not alone in finding this prospect chilling.

The Inevitable Fate of the Stock Market

While I may seem repetitive, I have dedicated considerable space to the principles of how stock prices are determined. Yet, in truth, there is another factor of even greater importance.
This is precisely because "stocks are financial products that cannot be mass-produced." I believe this is something we must never forget. In essence, we should view the stock market as inherently destined to trade within a limited supply.

In ordinary markets, if a product sells rapidly and demand is expected to outstrip supply, production is quickly increased and goods are brought to market and shelves. Mass production and mass procurement become possible.
Conversely, if unsold goods pile up, they can be moved to other markets or stores, and in some cases, even sold off at a steep discount.
However, stocks cannot be mass-produced. Nor can they be moved to another market or supermarket simply because one wishes to sell them.
They are obligated to be bought and sold within the legal framework of the stock market.

Trading a Limited Number of Stocks within a Limited Framework

Since a limited number of stocks are traded within the confined space of the stock market, it is only natural that dramatic surges and crashes occur. If investors rush to buy, prices will soar in an instant, as the supply of this commodity cannot be replenished.

Conversely, if everyone rushes to sell, prices will plummet immediately. With no escape route, a crash is an inevitable phenomenon. Understanding the unique characteristics of stocks will help you accept why their prices fluctuate so dramatically.