How The Stock Market Works

Discussion in 'Share Investing Strategies, Theories & Education' started by Redwing, 3rd Jul, 2015.

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  1. Redwing

    Redwing Well-Known Member

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  2. Redwing

    Redwing Well-Known Member

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  3. trinity168

    trinity168 Well-Known Member

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  4. Redwing

    Redwing Well-Known Member

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  5. Redwing

    Redwing Well-Known Member

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    Chocolate > Vanilla

    Summary

    When you see returns on a chart, what returns are you looking at?

    • There are two kinds of total return: Chocolate and vanilla.
    • Chocolate > Vanilla.
    • When stock investors talk about returns, what do they mean?

    The returns from a stock come in two forms: price changes and dividends. That sounds simple enough.

    But when you read about a stock's "return," what are you looking at? Price changes only? Dividends only? Price changes +dividends? Total returns if you reinvest the dividends?

    It's not always obvious. Here's a chart from Seeking Alpha's quote page. Based on its labels, what does it show?


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    I would submit that it is not clear what the chart shows. We can safely assume that price is included, but what about dividends? Are dividends included or not? If included, does the chart show the impact of reinvesting them?

    Apparently, it is a price-only chart. The 52-week high price shown as $129 in the right panel appears to match the high point on the chart. It is a price chart.


    Continues...
     
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  6. Redwing

    Redwing Well-Known Member

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    Reinvested dividends in quality companies can do wonders

    David also listed a table of popular companies with their vanilla & chocolate total returns. The companies include Apple (NASDAQ:AAPL), McDonald's (NYSE:MCD), Johnson & Johnson (NYSE:JNJ), Berkshire Hathaway (NYSE:BRK.B), and others.

    The table clearly shows the importance of dividends to total returns. In the last 10 years, some of these companies did not beat Berkshire based on a price-only return.

    However, when dividends were accounted for, the three mentioned companies beat Berkshire and particularly so when dividends were reinvested.

    Here's a copy of David's table:

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  7. Redwing

    Redwing Well-Known Member

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  8. Redwing

    Redwing Well-Known Member

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  9. Lemmy a fiver

    Lemmy a fiver Well-Known Member

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    Otto @ IKN has a great Mining Company flowchart.

    Its too basic for many people more intelligent than I too understand.

    Don't know if the chart is his originally?
    But it pretty much sums up many investment products out there IMO, regardless of which investment sector people invest in.
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  10. Lemmy a fiver

    Lemmy a fiver Well-Known Member

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  11. TMNT

    TMNT Well-Known Member

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    ok, quite a novice share person here,
    just got a few questions

    just been looking/following a few shares to try and learn

    Ok considering HINDSIGHT i understand the general reasoning,of
    apple shares dropped from $163 to $160 after the iphone X was announced,
    other than it being expensive, it seems to be a good phone

    TPG seems to be gradualling falling in the last month from say 5.70 down to about 5.20 based on no real news,
    today the share bounced 30c up becuase the dividend was slashed from 10c down to 2c, and profitability forecass dropped a little bit

    now my conversation with share "experts", probably self titled, could any one have predicted the change in share price for the above two?

    a good iphone release should increase share price or keep it the same, unless the market was expecting to reinvent the wheel

    as for TPG, slashing the dividend seems to be a worrying fact, and a drop of profits results in a 30c increase!?!?!?

    all seems quite random to me!
     
  12. ACMH16

    ACMH16 Well-Known Member

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    TPG actually reported a continuing increase in most reported parameters. They cut the dividend with the reason that they've got a large amount of capex coming up and that was somewhat expected. They outperformed their previous profit guidance and more importantly - did not underperform it, which the market seemed to be expecting.
     
  13. LIDM

    LIDM Well-Known Member

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    People get very excited before any new iPhone launches, and from memory share price dips immediately after launch as it's usually not quite as earth shattering as expected.

    TPG released it's results, which seemingly were a lot better (NPAT up 9%) than analysts anticipated. I think many expected a cut in div... More complicated is future opportunity / risk with their mobile network build.
     
  14. Redwing

    Redwing Well-Known Member

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    For the Kids

     
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  15. Snowball

    Snowball Well-Known Member

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    Haha good stuff! I love a bit of Scrooge McDuck :D

    Those little ducks now know more about finance than most of the Australian population!
     
  16. SatayKing

    SatayKing Well-Known Member

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    Simplest way of describing how the share markets works is:

    Fear;
    Greed;
    Hope; and
    Frustration.

    Personally, I'd throw Blissful Ignorance into the mix.
     
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  17. Redwing

    Redwing Well-Known Member

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  18. Redwing

    Redwing Well-Known Member

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    Just how big is the ASX, anyway? – Datamentary

    Believe it or not, the humble ASX is actually pretty damn big – as of December 4th, it has a market cap of $2,466,617,359,800. If you find that number to be a little difficult to parse, try writing it in text: two-trillion-four-hundred-and-sixty-six-billion-six-hundred-and-seventeen-million-three-hundred-and-fifty-nine-thousand-eight-hundred-dollars.

    Below is a bubble chart showing all 2193 companies currently listed on the ASX sized in proportion to their market cap. You can hover over individual bubbles to see the full name of the company and its market cap.

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  19. devank

    devank Well-Known Member

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  20. Redwing

    Redwing Well-Known Member

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    The market cap of the top 5 S&P 500 companies: $4,095,058,706,432

    The market cap of the bottom 282 S&P 500 companies: $4,092,769,755,136

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