Understanding the Stock Market – How Do Stocks Work

Understanding the Stock Market - How Do Stocks Work

In this chapter about understanding the stock market I am not going to explain the basic terminology used in fundamental analysis, like intangible assets, net current assets and current ratio, as I believe most investors are familiar with this type of terminology. For those who are relatively new to fundamental analysis I recommend you to read the book: The Interpretation of Financial Statements from legendary investor Mr. Benjamin Graham, in which these common terms are explained very clearly. More information about this timeless guide to interpreting and understanding financial statements can be found by clicking this link.

To help you with understanding the stock market, I have created 4 articles so far. The Dow to Gold Ratio and the S&P 500 PE Ratio help you to determine how the overall stock market is priced while the January Effect explains why the stock market reacts like it does. In My Stock Market Analysis you will read why I believe the best investment options can be found in the energy and mining sectors.

  1. Dow to Gold RatioHow Much Are All the Dow Jones Companies Worth Expressed in Gold. Read here why I believe that the Dow to Gold ratio will come down. You can also calculate today’s Dow to Gold ratio yourself.
  2. S&P 500 PE RatioHow the Price Earnings Ratio Helps You to Valuate the Companies in the Standard and Poor 500. I explain how the S&P 500 PE ratio determines if the current valuation of the stock market is expensive or cheap, and where today’s value can be found.
  3. January EffectHow Do Tax Loss Selling and Window Dressing Effect Your Stock Prices. The January effect refers to the general increase in (small) stock prices during the month of January. On this page I explain why.
  4. My Stock Market AnalysisWhy I Believe the Best Investment Options Can Be Found in the Energy and Mining Sectors. In order to exemplify some of my insights, I present a summarized version of my stock market analysis in this article.

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