Why Is the Stock Market So Complicated?

Investing in the stock market now is easier than ever. With the click of a button, you can own shares of major companies like Tesla, Apple, Amazon, and thousands of others. However, while buying shares is easy, the stock market as a whole is very complex, to the point that it turns many people off from even trying.

The stock market appears complicated because so many entities interact millions of times during a day. There are thousands of companies, different investment products and strategies. This creates countless variables outside an investor’s control that move the market.

This article will explain what makes the stock market so complicated and how you can make it simpler and easier to understand to reach your investment goals.

The Stock Market Is Complicated Because It’s Very Competitive

In essence, the stock market operates behind a straightforward idea. In 1602 in Amsterdam, the Dutch East India Company became the first publicly-traded company when it decided to sell shares of its company to the public in an effort to spread risk between multiple expeditions.

The plan was largely successful, growing the company into one of the largest in the world and allowing them to share their profits with the shareholders, benefiting the entire economy.

The stock market today operates under the same simple principle, to spread risk and grow shareholder profits. Companies go public in an effort to raise funds and boost operations. However, since then, many things have changed. Here are some of the main reasons why people find the stock market complicated and intimidating:

  • Instead of one, there are now thousands of publicly traded companies worldwide, across dozens of industries, time horizons, size levels, and different stock exchanges.
  • Over the years, investors have come up with hundreds of different strategies and ways to approach the stock market to turn a profit, each with its own quirks, pros, and cons, suitable for different demographics.
  • With the emergence of online trading platforms, people are encouraged to learn and start investing independently. It’s now easier than ever for someone who knows nothing about the stock market to download an investing app and start trading, often leading to financial loss and overall skepticism about investing.
  • There are now many more investment products you can buy compared to the early days, such as: Options, EFTs, Futures, and more.

There’s No Guarantee You’ll Make Money in the Stock Market

Another major factor that complicates the stock market is that there are certain things about it that you can’t learn. No matter how many books you read or financial podcasts you watch, there’s no guarantee that your investments will become profitable. You could even lose a large sum of money.

That’s because the stock market is very unpredictable. It depends on factors that you have no control over, such as:

  • Market behavior
  • Other people’s behaviors

No amount of knowledge will help you predict these factors, which ultimately decide the stock market’s direction. Sure, you can study past events and make educated decisions based on them, but there is no guarantee. 

Many profitable investors look at history to predict stock movements and are very successful at it. But, every situation is different and has to be approached as such. What worked in the past may not work in the future — this is one of the things every investor should know, especially before committing to a particular stock for the long term. 

You Need Some Luck To Succeed in the Stock Market

Before you start investing, it’s undoubtedly an excellent idea to acquire as much knowledge as you can. Read books such as Benjamin Graham The Intelligent Investor (available on Amazon.com) and stay on top of recent news and developments. Develop the skill of analyzing and recognizing patterns, as it can help you make better predictions.

Benjamin Graham also stressed a margin of safety when it came to stocks leading to a wide array of interpretations on what risks are acceptable to take with any one stock.

However, even professional investors who have all of the knowledge, skills, and experience in the world often find themselves making wrong predictions or misinterpreting margin of safety with a particular investment. There’s only one way to make sense of this, and that there’s an additional factor involved in stock market trading: luck.

No amount of margin of safety can protect you from being unlucky, but it can definitely reduce your risk.

To succeed in the stock market, you need the right combination of knowledge, skills, timing, experience, and luck. Some of these factors are within your control, but some aren’t.

The Stock Market Ecosystem

To make sense out of the stock market and how it works, it’s essential to learn about the stock market ecosystem and the different units that partake in it. The stock market ecosystem consists of:

  • Market participants: The people and companies that invest in the stock market. They can be further divided into retail investors (regular traders like you and me and institutional investors (mutual funds, hedge funds, banks, corporations, trusts).
  • Assets: Something that has economic value and that people invest in. There are many asset classes. These are equities, fixed income, cash, commodities, and currencies.
  • Instruments: Means of which the assets are transferred between owners.
  • Exchanges: A marketplace where all the assets are traded, for example, NYSE, NASDAQ, LSE, and TSE. These exchanges give companies the platform to sell their shares to the public.
  • Brokerages: Bring buyers and sellers together and help facilitate the transaction.

These units and a few others are interconnected, and each plays a vital role in the stock market ecosystem. The fact that so many units are at play is precisely what makes the stock market complicated and unpredictable. 

Here’s a great YouTube video series explaining the stock market ecosystem and all of its different units:

How To Make Investing Simpler

While the stock market is undoubtedly a complex system, it isn’t impossible to understand, and there are often very logical and mathematical reasons why certain things happen. To make investing simpler, here are a few things you can do:

Buy Index or Mutual Funds

An index fund tracks a market index. It’s typically made of stocks or bonds. The fund usually 

follows all the index components that it’s based on, and it has a fund manager who makes sure that the fund performs the same as the index.

With an index fund, you get to own a diversified set of securities, and all you have to do is track how it’s doing without having to manage it like you would a typical portfolio of various stocks.

Mutual funds offer the same benefits as index funds, but they work differently. Instead of tracking an index, mutual funds are managed by professionals who collect money from a pool of investors and invest them on their behalf.

Get a Financial Advisor

Whether you’re watching a video of a fellow investor or reading a book from someone who made millions in the stock market, you’re essentially doing the same thing: seeking advice from others.

If you seek advice, you could consider paying for a financial advisor whose job is to help you reach your financial goals. With the help of an advisor, the stock market will become a lot more straightforward as you’ll have a dedicated professional that’ll open your eyes to the best opportunities, trends, and stocks you should invest in.

There are also plenty of free financial advisors. Still, it would be best if you took their advice with a grain of salt as they often have a hidden agenda, such as deliberately pushing certain companies or products. If the advice you’re getting is free, you should ask yourself, “Where’s the person giving me the advice earning money from?” 

The best thing about financial advisors is that you still have complete control over your money. They’re simply there to point you in the right direction. Ultimately, it’ll be you who decides whether to listen to them or not.

Unfortunately, this is a double-edged sword, as even if you receive sound financial advice, it doesn’t mean that you’ll follow it, which can end up costing you.

Target Date Funds

As you can tell, investing in funds is a lot simpler than figuring out and managing your own portfolio. A target-date fund is typically a retirement fund, and its goal is to grow your assets in a way that meets your goals and needs in a future time frame. 

Target date funds are either mutual funds or ETFs, constantly adjusted to optimize risk and potential gain based on the given time frame. Just like most other funds, these are great for putting your investments on autopilot and watching them grow. 

Buy Stocks Based on Fundamentals and Balance Sheets

There are countless ways to value stocks and determine risk, however the easiest methods may be the simplest. This is often called balance sheet investing and is my primary method of valuing stocks. If the share price is at or below book value while the company remains profitable there is a great chance that you are buying a cheap undervalued stock.

Using this simple logic often outperforms those working too hard to find or create shortcuts with investing leading to a time tested approach that has performed well for many investors.

Is It Safe To Invest in the Stock Market Now?

The stock market is complex and volatile. If you’re new to the stock market and unsure whether or not you should invest (or invest more) in the stock market now, you likely will want to know the answer.

It is neither safe nor dangerous to invest in the stock market right now. You should avoid timing the market whenever possible. That’s because the stock market is unpredictable. Only invest in something you’ve researched and truly believe in whenever you find appropriate.

Again, luck also plays a role in your success in the stock market.


The stock market is a complex system of systems. Thousands of companies across many industries, millions of investors, exchanges, and brokerages interact and impact the market movement.

There are many things about the stock market that you can’t predict, such as human and market behavior and luck.

To make the stock market simpler, you should consider investing in funds or paying for a professional financial advisor.

Bryan Shealy

Bryan Shealy is an active value investor. He currently focuses on the small and micro cap stock market looking for bargains. He has written content for Seeking Alpha, Net Net Hunter and Broken Leg Investing.

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