3 Facts You Need to Know About the Stock Market

Investing in stocks is a big key to long-term wealth and prosperity. But you need to know the basics of the stock market to be a good investor.

In the following video, Dan Caplinger, the Motley Fool's director of investment planning, discusses three key facts about the stock market. Dan examines three different ways to categorize stocks and points out some of the advantages and disadvantages of each group of stocks. Specifically, in discussing the historical edge that small-cap stocks have over large caps, he looks at the example of the energy industry and the struggles that oil giants ExxonMobil (NYSE: XOM  ) and Chevron (NYSE: CVX  ) have in keeping their production levels up, even as small up-and-coming exploration and production companies produce huge growth.

Dan goes on to examine the value-versus-growth debate, using the recent struggles of Intuitive Surgical (NASDAQ: ISRG  ) as a way to highlight the challenges high-growth stocks face when their growth inevitably falters. Finally, Dan talks about international stocks, noting that the long-term performance of the iShares MSCI EAFE ETF (NYSEMKT: EFA  ) is very close to the domestic SPDR S&P 500 (NYSEMKT: SPY  ) , but that the two often produce different returns year-to-year, providing some diversification.

Invest in what you know
Now that you know these key facts about the stock market, it's time to think about your financial future and get started with an investing plan of your own. Our brand-new special report, "Your Essential Guide to Start Investing Today," tells you the steps you need to follow to get started, as The Motley Fool's personal finance experts show you why investing is so important and why you shouldn't wait another minute before moving forward. Click here to get your copy today -- it's absolutely free.


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  • Report this Comment On September 29, 2013, at 3:35 PM, PEGformula wrote:

    **

    Investing may be smart but putting money into the present stock market, going long anyway, is not and for 2 big reasons:

    1) It's overvalued tremendously - and everyone should know it's artificially high from the unlawful Federal Reserve manipulation. If not, realize that historical data shows the long-term PE ratio for the S&P500 to be 13, not 15, as the recent bubble valuation years are outliers to the 100-year data AND the PE ratio tends to 6 to 8 in the worst of times. Today is similar if not WORSE than the lesser depression of the 1930's. We have a real 25% unemployment rate now, similar as before. Our present GDP growth rate is negative 8-10 percent upon PROPER accounting with the real inflation rate and percentage of the GDP due to the federal deficit. As you see, our future is far worse now than before with immigration while we do not have the space like before, outsourcing, the wealth divide caused by the Federal Reserve, and business efficiencies that means we need fewer workers to effect the same level of supplied goods and services. At least back in the 1930's the most crucial job of agriculture required over 40% of the workforce but today it's under 2%. In the 1930's we could have looked to better times but today we are looking to WORSE times.

    2) The present stock market system is rife with manipulation and is far more a musical chair game than one of investing.

    Until a fair, manipulation-resistant stock market system becomes mandated by the SEC that actually is about investing, that is highly stable, fair, saturation easily identified by an easy comparison with the cash markets, most of Wall Street taken down as middle-men would be excluded, short-selling would not be needed as today since saturation would be easily identified, high frequency trading would not work thereby eliminating another way money is skimmed from people, I say stay clear of it. Such a system was given to the SEC over 3 years ago but they won't act on it unless there is broad public support. It can be viewed in the book "God Gave You a Brain; Use It!" that also contains a new monetary system that is inflation adjusted whereby the monetary unit is defined by a unit of labor so currency exchanges could be eliminated, and a means to lower excessive executive compensation by a news proxy voting system.

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