Why does the stock market generally always tend to go up?
The stock market does not always go up, make no mistake about it.Markets in general are not moving up always. they move in cycles.
Why people think that the stock market always go up?
a)Because companies don't distribute all their profits, so like a zero coupon it goes up naturally because they store a bit of profits every year.
b)With growing labor force (more hands) GDP & profits have been growing in the 20 century
c)Since we measure the market with the stock indexes and the stock indexes accept companies that are doing well and expel companies that are doing poorly naturally with a rule like that you always win.
In countries that are not many companies waiting to enter the stock indexes the process i described in c) does not materialize. In Europe there are not enough candidates, some indexes like Portugal PSI 20 don't even have 20 companies that the name PSI20 suggest. In those cases things can get nasty for a long time. The all time high in Portugal was established at 13384 in 2007 now trades at 5200 points.
So my advice is the following
a)Never think that investing is a science, it's not it's a game with some rules but no a science
b)Anything is possible
c)Be flexible
d)Don't have a philosophy unless the Philosophy is not having one
e)just do like the indexes do more of what is doing well and get out like the plague of what is not working
Finally be an optimist because life is better.
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