Stock Market Fluctuations

The economic health of a country will strongly influence its stock market. When the economy is doing well the market is bullish. Bull markets occur during times of high economic production, low unemployment and low inflation. Bear markets, on the other hand, follow downturns in the economy. When inflation and unemployment are rising, stock prices are usually falling.
Stock price fluctuations are also driven by supply and demand, which in turn are dependent to a great degree on investor psychology. Seeing a stock price rise rapidly can cause investors to jump on the bandwagon, and this rush to buy drives the price up even faster. A falling price can have a similar effect in the other direction. These are short-term fluctuations. Stock prices tend to normalize after such runs.
The stock exchange is only 1 of many opportunities for people to invest. Other popular markets include the Foreign Exchange Market (FOREX), the Futures Market, and the Options Market.

FOREX: World's Largest Market

The FOREX is the biggest (in terms of value) investment market in the world. FOREX traders buy 1 currency against another and can profit from small changes in currency value. Most FOREX trades are entered and exited in 1 24-hour span, and traders have to keep a close watch on the market in order to make profitable trades.

The Futures Market

The Futures Market is a market of contracts to buy and sell certain goods at specified prices and times. It exists because buyers and sellers of goods wish to lock in prices for future delivery, but market conditions can make the actual futures contract fluctuate considerably in value.
Most investors in the futures market are not interested in the actual goods -- only in the profit that can be realized from trading the contracts.

The Options Market

The Options Market is similar to the Futures Market in that an option is a contract that gives you the right (but not the obligation) to trade a stock at a certain price before a specified date. These options can be traded on their own or purchased as a form of insurance against price fluctuations within a certain time frame.

Stocks: Low Risk, Long-Term

All 3 of these markets are considered quite risky without considerable knowledge and experience. They also require close monitoring of market movements. Stocks, on the other hand, are less risky because movements of the market are usually more gradual. Although short-term investment strategies are possible, most people view stocks as long-term investments.

Ripped off

Africa is being ripped off to the tune of some $500m a year simply for hooking up to the World Wide Web.And this extra cost is partly to blame for slowing the spread of the internet in Africa and helping sustain the digital divide, they contend.The continent is being forced by Western companies to pay the full cost of connecting to worldwide networks.This has led to the unfair exploitation of the continent's young internet industry.The problem is that International Telecommunications Union regulations,which ensures the costs of telephone calls between Africa and the West are split 50:50, are not being enforced with regard to the internet."British Telecom doesn't spend one single penny... America Online doesn't spend one single cent in sending emails to Africa."The total cost of any email sent or received by an African internet user is borne entirely by African ISPs.Despite the relatively high cost of using the internet in Africa, growth has been rapid in recent years.All 54 countries are now hooked up to the internet, and there an estimated four million subscribers across the continent.In Kenya alone, there are more than 100,000 subscribers and some 250 cyber cafes across the country.The current and latent demand for bandwidth in Africa cost about $1bn per year.If data network operators in the West were forced to adhere to the same regulations as voice operators then they would have to pay half the cost."The only reason this doesn't happen at the moment is that European and North American operators are not prepared to pay their share of the costs."This is exploitation... These networks are raping Africa of half a billion dollars a year."The G8 group of leading nations are responsible for this inequitable trade and at some point had to act to halt it, if they were serious about trying to bridge the digital divide.African countries are taking action by getting together to reduce their costs.A proposal called the Halfway Proposition urges fellow African countries to create national exchanges and then interconnected regional ones as has occured in other parts of the developing world.This would at least mean that the communications costs for intra-African emails stay within Africa,rather than the West benefiting from the cost of an email."No one really knows how much intra-African traffic there is, but it's sure to grow and become significant if it isn't already".If only 5% is intra-regional, it would add up to a sizeable amount.

A common mistake in investing

With the advent of online banking and online trading, the stock market has opened its doors to virtually every person willing enough to grow their money.
And yet, despite this, not everyone has joined the bandwagon. The biggest factor being the potential risk involved in trading stocks. The stock market is among the most volatile financial institutions in business. And it’s this volatility that tends to be the biggest problem with the stock market.
Almost any reason, real or imagined can cause these extreme fluctuations that often affect the stock market’s credibility. Real factors such as the weather, political instability, political decisions, war, terrorist threats, boycotts and strikes, economic trends and international trade or even company scandals also become factors to the stock market problems.
Bad weather such as hurricanes affects certain industries such as oil production. This then drives the cost of petroleum products higher as production gets limited. This causes a cascading effect that drives stocks of oil companies higher.
Political instability in a country can affect investor confidence thus lesser investing is done. This causes the shares of local companies to slide downwards. Boycotts, strikers and terrorist threats have also proven to be the bane of the airline industry.
Shares of airliners have tumbled throughout the years with every terrorist attacks all over the world. But aside from uncontrollable factors such as natural disaster (or war), the common underlying link that allows these other reasons to affect the stock market so significantly is investor psychology.
Humans are prone to herd mentality. Often, people confirm with the actions and directions of other people. This is a common mistake in investing. An example of this is during the early 90s when dozens of dot com companies sold their stocks in the stock market. It created an artificial demand for stocks of companies that did not even provide real and concrete services.
These stocks soared in value as more and more enthusiastic investors bought them. This happened up until the time it was realized that these companies did not actually post any considerable profit to sustain the value of the shares. The stocks then tumbled and virtually lost value as investors frantically sold their shares.
This tendency to panic and depend on the direction of others is among the real causes of problems with the stock market.
There are two actions arising from this mentality:
a.) panic buying b.) panic selling
Of the two, panic selling causes the most harm since it causes a steep and quick drop in the value of shares. The best way to avoid causing these problems is to practice due diligence and to keep a level head while investing.