Institutional forces, such as mutual fund demand for particular stocks at any moment, and a host of psychological factors can also boost or depress stock prices. At times, investor demand drives prices beyond reasonable valuations, while at other times investor disinterest pushes stock prices lower. The political climate is also a major influence on stock prices, as is the general state of the economy, the level of interest rates, and the attractiveness of competing investments. The Road to Capital Growth Can Follow Various Routes Investors should know that, just as a mountain road twists and turns in its path to the summit, so the road to financial goals can also be varied and challenging. There are several approaches to stock investing.
Some investors prefer one, some rely on no particular approach, and others employ a mix.
Growth investors focus on companies whose earnings are expected to grow faster than both inflation and the economy over time. Growth companies reinvest much of their earnings into their businesses and most do not pay out dividends. Value investors look for stocks that are temporarily out of favor with investors, who have sold them down to prices sometimes below their intrinsic value. Both growth and value stocks have taken turns leading the market. Growth stocks are usually more popular when the economy is slowing, since their high earnings growth makes them more alluring.