Here is why you need to pay attention to the stock market

I never liked the stock market. I couldn't understand it. I couldn't deal with people who constantly talked about it. I didn't care if it went up, down or sideways.

That is, until I worked as a business producer. There were a few major market tumbles and that's when I realised how I affected I was by the stock market. 

I quickly learned how the stock market touches our day to day lives in more ways than we can imagine.

Even though you may never have had anything directly to do with the market and don't intent to have anything to do with it, it can still affect you.

And that is why we need to pay attention because the things that are happening on the stock market affect the rest of the economy. These economic signals are all around us. It’s really about us using our heads and watching what’s going on in our everyday lives.

Have you noticed how the packaging of products is getting smaller? All of a sudden you pay the same price for certain food items in the supermarket, but yet the packaging is slightly smaller. I've also noticed that clothes are getting cheaper and cheaper but have you noticed how the quality is dropping?

What are all these signals telling us about what’s going on? With the quality of clothes dropping, that’s telling you that in the emerging markets huge amounts of clothes are made today in China, and the cost of living is actually going up in those places and the demand is higher. In order to keep the price of clothing lower, the quality drops. And that means that our cost of living is going up.

What’s happening here is a basic concept called inflation. As we keep seeing, inflation is a force to contend with.

Now, why is this important?  These everyday signals that are all around us show us where prices are going and where we need to be positioning ourselves in order to stay ahead of things. When prices are rising and we are not pricing ourselves, our products or our services appropriately then we are placing ourselves in a dangerous position of weakness.

Sadly as women in general, we tend to earn less than men. We tend to find it very hard to price ourselves, to value ourselves and then to negotiate the right price for what it is we do be at that salary or charging for services that we do or even products that we sell or charging in our businesses.

This means we remain behind the curve and this is dangerous because later on, if we’re not staying ahead of the rising prices, then actually we’re slowly getting poorer and inflation is making us poorer. It’s really important for us as women to think about this. We need to be savvy here. We need to stay ahead of this inflation game and we need to understand what’s going on and we need to watch it in our everyday surroundings around us.

So how do you know  what to look out for? You can’t, at least not perfectly. But by following a few simple guidelines, you can avoid getting caught up in the hype and stay focused on what really matters.

Ignore the day-to-day moves. Economist Eugene Fama won a Nobel Prize for demonstrating that the stock market is a “random walk” — its short-term moves don’t reveal anything about the long-term trend.

Look beyond SA stocks.  One hint that the recent volatility is worth your attention is that it hasn’t been confined to the stock market, or to SA. It has hit international markets, government bonds and currencies, too. And the various moves generally make sense together.

Keep it in context. It’s also worth keeping the whole market in context.

Many factors can influence your financial well-being. The more you know about these factors, the better you can cope with them. To ignore them can be dangerous. Keeping up to date on certain key aspects will help you to manage your own personal finance better and take advantage of opportunities in your work place or business that you might not have previously recognised.

Do you pay attention to the stock market?

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