Knowing how to react to economic news and rns

Tuesday, 2nd June 2009 08:08 - by Boredmum

Before I started investing in Shares I paid little interest to the world economy. I know that sounds bad, but I was happily plodding along in life and doing well, so a lot of these external factors were of no concern to me. Obviously, things are now different. World events, the state of the economy, etc. - these things have a major impact on the stockmarket. So now I am taking much more of an interest. Just taking an interest is clearly not enough...knowing how to react is the thing I need to master. Take a recent example; I read on my broker’s page about S&P downgrading the U.K. ‘s economic outlook. As soon as I read this I knew it was bad. We then proceeded to have two days where a lot of ‘red’ was showing on the markets. Now, I had that news but didn’t act on it. If we receive another downgrade, I may have to close some positions. I guess knowing how to react only comes from experience. It’s like reading an rns and thinking ‘How is the market going to react?’. Take Mecom (TIDM code: MEC) as an example. I knew there was going to be a Rights Issue, but I saw this as a positive. Their finances would be sorted with the funds raised and the market would view it favourably. Well, the MEC rns did not go down well - a Rights Issue of 6 to 1 and lots of people selling as they could not afford to take their rights, seeing massive dilution ahead. I guess if I knew how to react to news I would have been out of that straight away. I am sure in time I will be more able at reacting. Like everything, it takes a while to master.