There are two things that move stock prices. In the short-term, stocks are a popularity contest. How else can you explain some of the values of tech stocks today? People are voting with their hard-earned dollars. They love tech stocks…at least for now. Some day they will love something else.
In the long-term, company fundamentals like sales, earnings, and profitability matter. If a company doesn’t make any money and stops growing its sales, it is going to fall out of favor. Would you continue to own a private company if it lost money for a decade? I wouldn’t.
Be smart like these kids. Do your research into what you’re buying when you invest (or work with someone who does). It will pay off in the long-term.
About the Author: John O’Connor
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