Stock market is influenced by many factors which not only operate domestically but also internationally. These changes in stock market can have an effect on our total return indices as these are the measure of our overall portfolio returns. Not only do they affect our total returns but also individual returns such as dividends. Many people now invest in Dividend Index Fund and thus, whatever influences stock market will also influence this fund.
In the nut shell, when a person is planning to invest in stock market, they should know what are the factors that influence it in order to incorporate these factors and changes in their portfolio and any further investment that they do. While, many small factors influence the stock market, these factors can be categorized in the following-
- World Events - Whatever happens on the international stage can affect our domestic markets whether good or bad. Changes in leadership whether through election, monarchial deaths, violent takeovers can affect our markets for the better or worse. Exchange rates, trade agreements and changes in any international reforms can boost the economy and promote investment or can even cause panic.
- Economy- A healthy economy means a stable stock market. When unemployment rate is low, the economy is strong and thus more people have money to invest. A strong economy indicates that more people are confident and have enough money to spare to invest in assets, shares, bonds, etc. and as a result boosting the economy further. Additionally, Interest rates can also have an effect on the market indices
- Scandals - This can have a major effect on the financial world. Insider trading, window dressing and other white collar crimes have affected the prices and stocks of major companies and have even brought down the associated companies. This can cause a panic in the market and overall stock market can see bearish trend, thus affecting those who are not even involved in the scandal.
- Company News - Formal company announcements and news can also affect the prices of the stock and the market trend analysis. A news which is perceived positively by the investors can lead to a rising stock market, however, if it is seen as negatively, it can cause fall in the stock price of that company and rising prices of the competitors stock.
- Politics- Along with any world events, internal and external political events can also influence the stock market and is undoubtedly affected during the election cycle. The stock market works within the legal framework. When this framework changes as a result of government regulation or deregulation, there can be volatility in the market. Additionally, stable political conditions can see a stable stock market as well.
There are many more factors that influences the financial world besides the one mentioned such as Supply and demand, market hype, etc. An investor should carefully study these effects and the market before making any investment decision to get the best returns. Invest carefully and you shall see your portfolio grow exponentially!
The author is a financial expert. From giving the best investment advices to what is influencing your dividend index fund, the author has knowledge of about all that is happening in the financial universe. With the complete trivia of what is moving the total return indices , the author at all times keeps a close eye on the market to see where to invest and when to invest.