@oscaruchoPlenty of books out there to explain. Benjamin Graham...

@oscarucho

Plenty of books out there to explain. Benjamin Graham and Adam Smith are a good start. Reading these two books will give you the general knowledge on why the stock market acts like it does.

If you are just starting out, I believe you really need to know the lay of the land. Find at least two sectors you are interested in and get to know how they make their money, business models, niche and most of all; know the players past and present that's cemented and/or currently cementing their mark on the industry. Once you've done this, it is pretty clear which companies are worth investing in because they will stick out like a sore thumb.

Next, it becomes a waiting game and you could be waiting a while before the ones you are interested in goes below fair value but it's well worth the wait. A lot were really cheap March 2020 for an obvious reason. Not sure when we will see another wholesale event like that where they all come down below fair value. Rest assured it is bound to happen again. If not from a virus, it will be from the normal booms and bust cycles of the specific sectors they are in. But when an opportunity like that presents itself you need to take it with open arms. This is the time to catch as many falling knives as you can. If you did your due diligence then you should be fairly confident about the future prospects of the company regardless of the market sentiment they are in. There are pockets of the market living through a bust cycle now as we speak...

Once bought, now comes the hardest part. The real trick to investing is that 90% of your holding is driven by personal circumstances, not economics, not market pricing, not even company fundamentals anymore... If you can get into a position that do not require you to sell because you do not need the money. The better it is for your wealth moving forward. But if you constantly buy and sell to every market signal there is; or worse move entire positions over to new investments then you don't get to enjoy compound accretion which is where most of the fun is...

I know you asked for the 'why' but it really is better to understand the 'how'. When it comes to the market the answer to 'why' is as longer than a piece of string. Hope that helps.