Typical events that can cause a stock’s price to rise:

- Negative news reports about a company’s competitors: If they are in trouble, their customers may seek alternatives to buy from, including your company.

- Positive news reports about a company: The news may report that a company is enjoying success with increased sales or a new product.

- Positive news reports about a company’s customers: Maybe your company is in industry A, but its customers are in industry B. If you see good news about industry B, that may be good news for your stock.

- Positive news reports about a company’s industry: The media may be highlighting that the industry is poised to do well

Economic effects from government actions:

Political and governmental actions have economic consequences. As a matter of fact, nothing has a greater effect on investing and economics than government. Government actions usually manifest themselves as taxes, laws, or regulations. They also can take on a more ominous appearance, such as war or the threat of war. Government can willfully (or even accidentally) cause a company to go bankrupt, disrupt an entire industry, or even cause a depression. It controls the money supply, credit, and all public securities markets.

What happens to the elephant-foot, umbrella stand industry if the government passes a 50 percent sales tax for that industry? Such a sales tax certainly makes a product uneconomical and encourages consumers to seek alternatives to elephant-foot umbrella stands. It may even boost sales for the wastepaper basket industry.

The opposite can be true as well. What if the government passes a tax credit that encourages the use of solar power in homes and businesses? That obviously has a positive impact on industries that manufacture or sell solar power devices. Just don’t ask me what happens to solar-powered elephant-foot umbrella stands.

Conservative investing

Your investing style isn’t a blue-jeans-versus-three-piece-suit debate. It refers to your approach to stock investing. Do you want to be conservative or aggressive? Would you rather be the tortoise or the hare? Your investment personality greatly depends on your purpose and the term over which you’re planning to invest.

Conservative investing means that you put your money in something proven, tried, and true. You invest your money in safe and secure places, such as banks and government-backed securities. But how does that apply to stocks?

Conservative stock investors want to place their money in companies that have exhibited some of the following qualities:

- Perceived staying power: You want companies with the financial clout and market position to weather uncertain market and economic conditions. It shouldn’t matter what happens in the economy or who gets elected.

- Market size: Companies should be large-cap (short for large capitalization). In other words, they should have a market value exceeding $10 billion. Conservative investors surmise that bigger is safer.

- Proven performance: You want companies that have shown increasing sales and earnings year after year. You don’t demand anything spectacular, just a strong and steady performance.

- Market leadership: Companies should be leaders in their industries.

As a conservative investor, you don’t mind if the companies’ share prices jump, but you’re more concerned with steady growth over the long term.

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