What is a stock market index?

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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