Over the past several days, the Dow Jones has dropped several hundred points. What is the significance of that?

Question

Over the past several days, the Dow Jones has dropped several hundred points. What is the significance of that?

2 Answers

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Answer 1

Stocks are falling in the wake of the oil price collapse and the slower than expected growth in the Chinese economy. Add to that a "lame duck" US president (no matter how nice a chap he is) and a European Community that is at odds with itself over aid to it's poorer members and has the UK threatening to leave. And you have "uncertainty". Thus the three largest economies in the world are "worried" All have eye-watering debt. Curiously, most analysts think that most stocks are probably substantially undervalued and logically "things must get better in the medium term". The bad news is that we can't rely on that.

Answer 2

The stock market is a device for transferring money from the impatient to the patient. -Warren Buffet

In the grand scheme of things? Nothing really. I have stocks that are pretty much a straight line for the past decade, doesn't mean I'm not getting those fat dividends though.

If you actually know and understand what is it exactly you're investing in, not to mention making educated predictions on market trends for the future, you have nothing to worry about. You know how the company operates. You know what they provide. How they deal with consumers. How consumers react the the products and services. Heck if you're lazy, a quick look on glassdoor to see what employees say about the company they work for can give you some valuable insight on how the company is run. Is management reliable? Do employees have the right leadership?

The stock market isn't a game where everybody wins. It's a game where you make money off of impatient and incompetent people along with those who would consider "precious metals" as an "investment". People make money off of people losing money. A lost for you is a win for me.

A stock is an ownership of a company. The only thing you should worry about is how the company is run and how consumers respond to its products/services. A stock ticker is merely a representations of mixed emotions. Not the cold hard cash a company brings in at the end of the day.