Investing Advice

What is a stock market index?

Certainly the stock of any company that is profitably growing from small to big is a great value. Obviously stocks from companies that may seem over-priced can be great "values" if the company is growing by leaps and bounds. But this kind of value is called a growth stock.

Companies whose sales and earnings are growing faster than the average are growth companies. Since the company is getting bigger and more profitable, there is increased interest in these companies and investors are willing to pay "too much" for their stock, as evidenced by their higher P/E ratios.

The marketplace has high expectations for such a company's future, even though it may not yet even be earning a profit, since its exploding sales may have created the expectation of huge future gains.

Almost all the biggest winners of each decade had a P/E ratio that was “too-high” before their stock price’s biggest gains, including Microsoft, McDonald's, Home Depot, and Wal-Mart.

The general strategy of growth fund managers is to find companies whose earnings expectations and valuation are both rising. They look at the price-to-sales ratio and make a determination that the company’s share of its market sector is increasing.

Growth stocks do best in a bull market, but seem to get hammered during bear markets.

Company Size - Big, Medium, Small and Very Small

Another way to categorize stocks is to group them by the total value of their stock, called their capitalization, or "market cap". As you learned previously, this isn't how big a company is based on their sales or number of employees, but only how much the marketplace says their stock is worth.

Other Stock Market Basics Topics:

  1. Mutual Fund Advantages
  2. History of Mutual Funds
  3. NAV
  4. Dollar Cost Averaging
  5. General advice about choosing a fund
  6. Mutual Fund Ratings
  7. Evaluating Mutual Fund Investment Risk
  8. Mutual Fund Share Classes
  9. Mutual Fund Fees
  10. The Mutual Fund Prospectus
  11. How important is the manager's length of experience?
  12. Why is the prospectus hard to understand?
  13. Mutual Fund Annual Report
  14. Comparing your fund to the competition
  15. Comparing funds on an after-tax basis
  16. Average Return on Investment
  17. How Not to Pick a Mutual Fund
  18. Cashing in Your Fund
  19. When to Sell Your Fund
  20. Mutual Funds and Asset Allocation
  21. When to get started with a mutual fund
  22. Types of Mutual Funds
  23. Value Stock Funds
  24. Growth Stock Funds
  25. Small and Micro-cap Stocks
  26. Mid Cap
  27. Large Cap Companies
  28. Income Stock Funds
  29. Mutual Fund Index
  30. Enhanced Index Funds
  31. Sector Mutual Funds
  32. Stock Market Sectors
  33. Defensive Stocks
  34. International Funds
  35. Real Estate Mutual Funds
  36. Socially Responsible Funds
  37. Balanced Funds
  38. Tax-Efficient Funds
  39. Bond Convertible Funds
  40. Junk Bond Funds
  41. Mixtures of stock types
  42. Closed End Funds
  43. Exchange Traded Funds (ETF’s)
  44. Stock Picking Strategy - Picking your own stocks?
  45. Fund names, and what they really invest in
  46. How to get started
  47. Where can I start investing with no money?

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