As far as I understand, the only thing that investor really get from the company’s profit is mainly from dividends. So, all other P/E ratios, fundamental analysis, chart analysis, etc for stock price growth are no better than just looking into a fortune-teller’s crystal ball? Stock prices seems to be almost entirely driven by “market forces” aka what people feel about the company. Whatever those “expert” analysts say seems to be just trying to put meaning into something that really doesn’t actually impact the stock price, not much difference from horoscope? There are many big profitable companies with almost flat stock prices and there are also companies without any real profits but the stock prices skyrockets.
In: Economics
ELI5: it doesn’t.
There’s no basic answer as to why. So many factors influence share prices:
– company performance, and it’s performance relative to the market
– perceived riskiness of the market / operations / strategy
– dividend policy
– external factors (tax policy, returns on bonds and risk-free assets etc)
– utter nonsense (ie analysts simply not understanding the market and believing what they are told / have read etc)
The stock market is a fool’s game. The top performing fund managers are never consistent one year to the next. It’s possible to consistently “do well” but there are no guarantees and the higher the stakes, the less likely the consistency of performance
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