The fact is, stocks don't have a “fair value”, and they never have. The buying and selling, and so
the moment’s price, is driven by psychological forces (fear of lost opportunity, envy over the
killing that a friend made in the market, good news, bad news) and economic forces (productivity,
inflation, deflation, etc.). It’s what the crowd thinks about all of this that creates demand or a
lack of demand.
Whether it’s because of a company’s growth or “because it’s a big company that pays a regular
dividend”, big demand for a stock comes down to one thing, and only one thing: investors think
that they will make money by buying the stock. Period.
The Beardstown Ladies Investment Club (of Illinois) sold a lot of their books and received lots
of publicity when they reportedly earned 23.4% for 10 years. Turned out that they didn’t know how
to figure percentages, actually earning an annual average of 9.1% while the S&P 500 averaged 15.3%
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Other Stock Market Basics Topics:
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Stock Market Basics
- Why invest in the stock market?
- Why Sell Stock?
- How are shares bought and sold on the NASDAQ?
- How stocks are traded on the New York Stock Exchange
- What are ECNs?
- Supply and Demand
- American Stock Exchanges
- International Stock Exchange
- What fuels demand for a stock?
- More to Know About Stock Trading
- Limit Orders
- Market Capitalization
- Preferred Stock
- How to Buy Stock?
- How much money do you need to open a brokerage account?
- Money Market Funds
- Margin Loans and Investment
- Corporation Executive Pay
- How much money do you need to open a brokerage account?
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