How to Know When a Change in Stock Price Means You Should Invest in or Avoid a Company
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There is a definite difference between an event and a downfall. Events are triggered by fear when investors fail to consider long-term consequences. Stocks typically go on sale, explains Town, because something inspires fear in the marketplace.
A company on sale is a great investment opportunity only when it shows promise after an event -- and not because it is in jeopardy of crashing and burning. An intelligent investor thinks about how recent events and geo-political moments affect and dip the value of stocks.
Though popular knowledge likes to think that a stock's price is equal to its value, smart investors realize this is not always true. Warren Buffett thrives on the long-viewed approach of finding companies at a discount and sticking with them as they grow.
Click the video to hear more about the distinction between stock events and dangerous downfalls.
Related: The Main Reasons Recessions Happen
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