Dividends and When risks outweigh growth: Wall Street bar rises

In the last two weeks of October the markets went down, and while there is no precise reason, Stan Choe of the Associated Press writes for a long time, investors did not care if the stock was cheap or expensive, what mattered was it growing?

If the answer was yes, then higher prices. because investors were willing to pay higher prices for growth.

Suddenly, every thing investors learned in investing 101 – price earning ratios, what is a value stock was back in vogue and value stocks have fallen less than growth stocks.

When Amazon and Google parent Alphabet report strong earnings but not as high as analysts had expected, the stocks went down.

To show how the ratios were working in the Russell 300 Growth Index  which includes Facebook, Visa and Home Depot, investors were willing to pay 29 times earnings or for every dollar the company made, they paid 29 times for one share.

In the Russell 300 Value Index the ratio was a more modest 16.46 times earnings.

As the Federal Reserve raises rates, stocks are not the only option which is why bonds look more attractive than risker stock investments.

Linking to dividend paying stocks, it is important to remember the reason why you are buying them is for the dividend. Eventually investors will gravitate to the better dividend companies because they are making profits. Shares in companies which make profits will over the long time increase in value. The dividends plus the increase in stock price will make a good return on your investment.

There are more questions than answers, till the next time – to raising questions.

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