bubble market - how to find them
basic materials sector companies are more volatile to bubble markets Bubble markets happen a lot these days and happen when the price of a good or service becomes higher than it should for reasons that are not fundamentally sound like supply and demand. Many times these markets happen off easy credit, which is what caused the housing market to crash in the end. People were literally buying houses off credit and nobody was even living in them, which would mean that the demand was artificially inflated and ready to crash at any moment. Many people here want to start retiring young, but investing in volatile markets is not the correct route to take. These markets are highly unpredictable and volatile to investors. How then can we find volatile markets about to collapse and how do we profit from them is the question asked by many investors. There isn’t any good way to find volatile markets about to pop except that they happen with no fundamental purpose just like with the housing market. These markets are like musical chairs because while some people will make a fortune other people at the same time won’t get a chair so to speak and everyone will literally go broke and lose everything. There are some things too look for when trying to determine if a stock, commodity, or good is being artificially inflated or is a market ready to pop. The first thing to ask yourself is how much credit is being used to buy equity in what you are buying? Just like the housing market example a lot credit is being used to buy equity in houses which means it will probably turn into a volatile market in the long run. The next thing to think about simply how fast is the commodity or equity rising in price? That’s an obvious one, but one that is not always looked at. The quicker something goes up in price the better chance that it will collapse. The last thing to consider is how long has the commodity or equity been going up? It is true that some companies have gone up for years, but the longer something goes up especially for no fundamental reason the greater chance it has of collapsing. If you are looking at being safe with your money make sure you at least think about bubble markets in the investments you make. |