It’s not unlike watching for big waves on the beach.
Oftentimes entire industries will make big moves on the same day. This happens when movement is not the result of any particular company’s performance, but of broader industry trends. While some oil companies do better than others, for example, most of the time they all rise and fall together. This is because when industry-wide trends are in motion, investors all across that industry will have to reevaluate the feasibility of the subjects of their investments.
Knowing which industries are moving in which direction can often be more valuable than becoming extremely knowledgeable about a few good companies. Some metrics are easier to keep up with than others. For example, the housing market is always being closely watched by many people because it is both a huge market and a key indicator of a country’s economic health.
When it comes to your own choices in investment, try to remember a few things. Lagging sectors are often targeted by contrarians, investors who look for stocks that are doing poorly, but are set for a big rebound in the long-term. It is also important to remember that sectors that are doing very well are often subjected to profit-taking behaviors. As always, it is advised that you don’t risk your money on anything that you don’t thoroughly understand.
