🤫 Have you ever wondered what really drives the movement of stocks in your portfolio? 🤫
⏺These are the most important and valuable lines you will ever read on the stock market, and they will likely save you a lot of money and heartache - so be 100% focused now! 🚩
Shabbat Shalom, friends,
Today we will discuss a particularly fascinating issue that will help you understand once and for all what truly drives the stocks in your investment/trading portfolio! 💰
The excellent image we encountered and attached for you will simply show you today the main factors influencing stock prices in your portfolio - from a few hours to entire decades! 🕯
🤿 Let's dive in! 🤿
1️⃣Stock movement in the very short term - one day 🤖 You might be surprised, but in the span of one day, what truly moves stocks are mainly computer algorithms. 🤖
We are talking about automated, sophisticated, and extremely fast trading systems that perform thousands of buy and sell operations in fractions of a second based on real-time data, news, and trading patterns. 📉📈
They don't "think" like us, but rather react to changes at lightning speed. 🛒
2️⃣Stock movement in the short term - one quarter 📊 When looking at a quarter's span, what significantly affects stocks are analyst ratings, economists, newspaper headlines, and analysts from investment houses publishing buy or sell recommendations (often according to various financial interests). 🤝💵
These ratings, and especially changes in them, can significantly impact investor sentiment and move the stock in the short term. 🕯
3️⃣Stock movement in the medium term - one year 🗓 In the span of a year, the dominant factor is the valuation multiple - this is essentially the ratio between the company's market cap and its various financial metrics (usually earnings or sales). ✍️
The more investors are willing to pay for each shekel of profit or sale, the more "expensive" the stock will be, and vice versa. 🐂🐻
Changes in investors' perception of the stock price's "fairness" greatly influence this range. 💡
4️⃣Stock movement in the long term - 5 years 📈 And here we move on to things that are truly important for long-term investors! 💡
Over a span of years, what drives the stock is mainly the company's profit growth. ↗️
The more a company succeeds in increasing its revenue and growing steadily and profitably over time, the more its stock value will rise. 🪧
Profits are the real growth engine. 🚀
5️⃣Very long term - 10 years 🪙 Even further into the long term, over a decade, the critical factor is return on equity. ✔️
This is a measure of how efficiently a company uses its capital (investments, assets) to generate profits. 📊
Companies that consistently generate high returns on the capital invested in them are those that succeed in yielding exceptional returns for investors over a decade. 📈
6️⃣Value investors - 20 years 🥸 For those of you thinking about investing for generations, for a term of 20 years or more, the most important factor is human capital - and organizational culture (what is the organization's 'why'?). 🤝
Companies with strong management, defined values, excellent organizational culture, satisfied and dedicated employees, and those that succeed in attracting and retaining the best in their field, are the ones that will survive, grow, and thrive for a long time. 🪙
This is the beating heart of all long-term business success. ⛏
In summary, this information highlights how important it is to distinguish between short-term background noise and the fundamental factors that truly build value over time. 📈
❓Ask yourselves❓
- What time horizon am I aiming for? ⌛
- What are the factors that will truly determine the success of my investment? 💡
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