How are stocks so liquid?

If the price gets high, and the stock is less attractive, the demand for it does decrease. And then the price will likely go down. But there are a LOT of people buying Apple. So less demand is just a relative thing.

Also, you don't know that they are overvalued and headed for a correction. If you knew that, you'd do well to invest all you can in the stock market and make a fortune. ; )

P.S. Furthermore, just because you might hbe smart enough to somewhat accurately ascertain that a certain stock is overvalued, doesn't mean that the rest of the world knows enough to agree with you.

To give you a completely honest and blunt answer: stupid people. Many people invested in the stock market don't know enough about finance to make smart decisions, but not many people like to admit it either. They just listen to the radio shows and popular opinions without spending their own time doing research.

Another reason is that it is definitely difficult to predict what is overvalued and what is heading for a correction. You could be a professional and still be wrong from time to time. Just because something trades at a very high multiple or has an unusual valuation doesn't mean it's a bad stock. It could mean there's a lot of potential in its future and might be worth buying into now.

An example: I have bought extremely overpriced stocks (think Chipotle at $350) and sold it for even higher prices a few months down the line because everyone thought it was the next big thing. I have also bought great stocks at a fair value and lost money as well. Stocks aren't as easy as people make it seem.

1. A liquid inventory is clearly any stock with a excessive quantity of trading volume, in which case it turns into a near-liquid asset like money. In different words, so many persons are shopping and selling the inventory at any given time that it's convenient to sell the stock when you wish to have to, on the market cost. 2. Day trading with a liquid stock is best in the experience that you can sell the inventory generally each time you wish, whereas a tremendously illiquid inventory is most often complex to promote at the fee you wish to sell it at. Nevertheless, there may be additionally typically less volatility with a enormously liquid inventory, so relying in your trading technique, you may also not get the wild swings in inventory prices day traders look for. Three. Like I recounted above, if there aren't many people buying and selling a inventory, it's hard to maneuver giant quantities of that stock on account that there are not any shoppers. The cost would proceed to shift downwards to where there are extra consumers. For example, in the event you were looking to sell 1,000 shares of a enormously illiquid inventory, possibly most effective 100 shares would sell on the market fee (say $15/share), and then downwards (14.75/share, 14.50/share, and so on.) unless the entire stocks are offered. However, a liquid stock like GE is switching hands so often a day that it is vitally not likely a singly individual can be promoting so much inventory directly that it will materially shift the price downwards. Except you're a billionaire or an institutional investor, you particularly wouldn't have to fear about it relating to the enormously liquid shares.

Hve you heard of busting the bubble?

Have you read about Dutch tulip bulbs??