Seems like fundamentals don’t matter at all anymore. Is the Fed the only thing the market cares about now? They can’t print money forever, right? IMO when inflation finally returns they won’t be able to borrow/afford interest payments/keep printing money and will turn to austerity/higher taxes.
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This is why I hate the stock market. You could know Apple will come out with a new device that will revolutionze modern tech as we know it and the next day, the stock falls because "investors expected more".....of course, the stock could go up but still wouldn't be surprised if it fell.
Markets are so unpredictable it's literally sad .......
Am I getting MS from those interns who think they are literal legends because they made $10 off of a stock, only to realize it was the dividend......
Isn't the market driven so much more by sentiments? You can have all your theses and numbers right, but still lose money because other people don't agree with you and move asset prices the other way. I feel at the end of the day, your performance is dictated by other investors and to be successful you need to know what others think which is basically impossible.
couldn’t agree more
This is what I hate in the stock market as note previously
The Fed doesn't control taxes; that's fiscal policy, which is government-oriented. I'm confused what you are saying in your third sentence. Who is "they" referring to? At first I thought you were referring to the general public and businesses, but then you mentioned printing money,(monetizing the debt) which would be the Fed. I think until inflation occurs and expectations are fully adjusted towards it, borrowers/spenders will benefit and lenders/savers will be hurt. Real interest rate= nominal interest rate- inflation, so when inflation rises throughout the course of loans, lenders are hurt and borrowers benefit. Also, savers will be hit extremely with lower purchasing power when everyday commodities prices continue to rise.
It'll be interesting to see how long it takes for inflation to take place in the economy again. In the short run, money supply growth doesn't necessarily lead to inflation, but in the long run, the price level usually grows proportionately to the percentage of money supply growth. As one of the users commented, the stock market is annoying in the sense that it's based completely on the supply and demand of shares that investors hold within it. That's why values can get misaligned from their fundamentals, as you said. Market prices are based on investors' perception of the market, and not necessarily what actually occurs. Talking about inflation, once it does occur and increased wealth pushes up stock prices and many try to profit off the fluctuations, it'll be interesting to see how much they made in real terms. I think if we do get a major resurgence in the stock market in the next couple years, it's going to be purely inflationary.
You're just figuring this out?
I love investing in the stock market, but admittedly, it's all a game. Let's break it down to if you owned your own neighborhood car wash service and were the sole owner of the company: if earnings rise, that's more money for YOU to put in your pocket (assuming expenses are mostly fixed)... these increased profits actually flow down to you, and ultimately get put in your pocket; there is direct correlation between how much money your customers are paying, and how much money gets deposited into your bank account. Under this instance, other people's perception of the VALUE of your company is completely irrelevant to how rich you'll get... the only thing that matters is how much the public likes and demands the actual good/service you provide. In other words, if people like your car washing company, more people will hire you, which will generate more earnings (again, assuming you have scalability) and thus these increased earnings will flow directly into your pocket.
But if Apple's earnings rise, and you own 30 shares (around $10,000 -- not an insignificant sum to most individual investors under 30 years old), Apple's increased earnings don't flow directly into your pocket. I know, I know... the argument will be that "you'll get increased dividends." But in reality, your $10,000 investment will net you around $100 a year in dividends... and I know, I know, another argument will be that "the company will buy back more shares with its increased earnings, thereby increasing EPS and, thus, your stake in the company." But again, all this is means is that the increased EPS will encourage OTHER investors to buy the stock, which will in turn increase the demand for the stock and, thus, drive the price of the stock up... meaning that one of the above commenters was right: as a regular, ultra-minority investor in any public company, making money is really about picking which companies will be PERCEIVED as being successful/profitable in the future... ie., it's really just a game of sales: not only selling your goods or services, but selling to investors the NOTION that "We're not only going to maintain our performance going forward, but we're going to IMPROVE our performance in the future. Trust us, things are going to get better. Things are going to be GREAT." Hence, you don't get more money because the company actually is more profitable, but you get more money (your share price rises) because people THINK the company is going to be more profitable.
All you have to do is look at the performance of Moderna the last 4 weeks.
It's all a game.
A fun and challenging game.
But a game.
Any way to play this game safely so you can stay at the bottom but still steadily get somewhere?
Bogleheads.org
Absolutely -- basically foolproof. 4 steps.
(1) Start investing early, right when you start working full-time.
(2) Invest in brand name companies, that are still growing their top-line (at least ideally 5 percent), that are reasonably valued in relation to their future growth prospects, when they are down at least 10 percent (ideally more) from their highs.
(3) Try to own at least 30 companies across different industries.
(4) Don't cash out of your equities for stupid shit, like a $10,000 watch; let your equity investments COMPOUND over time.
And boom, you're done. Yes, you should have some outlier investments; probably can't go wrong investing some of your portfolio in companies like JNJ over long term, or PG (because, even though their revenues are relatively stagnant and they're not incredibly cheap stocks, these companies produce hundreds of products that hundred of MILLIONS of people buy every day)... and you wanna stick your toe in some tremendously overvalued companies that you think have long-term potential, like Peloton or Twilio? Sure, buy a basket of these stocks (diversify) that maybe comprise 10-15 percent of your portfolio)...
But at the end of the day, do the above and you should build some impressive wealth over time. And of course, when I say "foolproof" at the top, I don't really mean that -- the stock market is risky, you never know what's going to happen and you could lose everything.
But if you follow history, the stock market is UP most of the time... and a diversified portfolio will return, if you include dividends, on average roughly 10 percent a year.
And that's basically what you do.
Yup very good points. The stock market isn't completely rational in the sense that share price doesn't increase just because a company earnings or profits are better. It comes down to how investors perceive the company performance. If investors believe that demand will rise in the future for the stock, that will push up current demand for the stock because of the idea of a greater return on investment when selling the shares. That's the only reason why EPS and company profits matter. Dividends aren't going to be a major stream of cash flow if you're not even holding 20% of the shares in the company. The financial ratios influence perception of the company which funnels into demand and supply of the stock, which are the ultimate drivers of the price.
Ha. I agree. I would love to do that for a living, too. Why? Because as I stated above, at least in my opinion, the stock market is a fun and challenging game. And if you can make decent money doing it, well, that makes it even more fun.
Park your cash in a select group of indices after consulting with an advisor. You’re an adult after all.
Turn on auto-transfer to allow for monthly purchases. Dollar cost average over your career. Stop trading headlines, and focus on your actual job.
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