What makes stock prices change

A broad-based demand increase can drive individual stocks higher without any company-specific news. One example: The COVID pandemic led to consumers increasing spending online at the expense of brick-and-mortar stores.

Some investors believe this change is here to stay, which led to an increase in demand and higher prices for e-commerce stocks across the board. Another example: Falling interest rates reduce what savers and investors can earn from savings accounts and fixed-income investments like bonds. This can lead those looking for better returns to invest in other assets, like stocks or real estate, thus raising the demand for those assets and inflating prices.

Long-term investors, like those of us at The Motley Fool, don't much care about the short-term developments that push stock prices up and down each trading day.

When you have many years or even decades to let your money grow, things such as analyst upgrades and earnings beats are irrelevant. What matters is where a company will be five, 10, or 20 years from now. While a lot of ink is spilled about daily fluctuations in stock prices, and while many people try to profit from those short-term moves, long-term investors should be laser-focused on a company's potential to increase its profits over many years.

Ultimately, it's rising profits that push stock prices higher. Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Average returns of all recommendations since inception.

Cost basis and return based on previous market day close. Investing Next Advisor Logo. Share Share on Social Media. Dori Zinn September 27, 8 Min Read. Getty Images. Editorial Independence We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission.

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Yes No. What are your favorite topics to read about? We want to make sure we're covering the subjects you're most interested in. Time is Up! As long term investors, we look for opportunities to capitalize on the market's short term irrationality to create long term wealth.

Thanks for watching guys, if you enjoyed this video please smash the like button down below. We've got plenty more like this one on our channel, with more videos being added every week. Nick Sciple owns shares of Apple.

The Motley Fool recommends Apple. The Motley Fool has a disclosure policy. Buffett is betting big on his favorite company. It might be time to follow suit. Inflation is at a year high.

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