Please ensure Javascript is enabled for purposes of website accessibility

3 Facts You Need to Know About the Stock Market

By Dan Caplinger - Updated Mar 7, 2017 at 4:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investing in stocks is smart, but you need to know how the market works.

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 (XOM 0.87%) and Chevron (CVX 0.14%) 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 (ISRG 1.00%) 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 (EFA 0.77%) is very close to the domestic SPDR S&P 500 (SPY 1.69%), but that the two often produce different returns year-to-year, providing some diversification.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Chevron and Intuitive Surgical and owns shares of Intuitive Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Exxon Mobil Corporation Stock Quote
Exxon Mobil Corporation
XOM
$94.00 (0.87%) $0.81
Chevron Corporation Stock Quote
Chevron Corporation
CVX
$159.85 (0.14%) $0.23
Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
ISRG
$238.37 (1.00%) $2.35
iShares Trust - iShares MSCI EAFE ETF Stock Quote
iShares Trust - iShares MSCI EAFE ETF
EFA
$66.76 (0.77%) $0.51
SPDR S&P 500 ETF Trust Stock Quote
SPDR S&P 500 ETF Trust
SPY
$427.10 (1.69%) $7.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.