TED-Ed: How do investors choose stocks? | Richard Coffin

The video explains stock trading, highlighting how stocks represent ownership in companies and how their prices are determined by market dynamics. It discusses investor goals, such as beating inflation or the market, and contrasts active and passive investing strategies. Active investors aim to exploit market inefficiencies, while passive investors focus on long-term growth through index funds. The video concludes by noting that many investment strategies combine elements of both approaches.

What determines the price of a stock in the market?

• The number of employees

• The number of buyers and sellers

• The company's annual revenue

• The company's total assets

What does 'beating the market' typically refer to?

• Investing in international stocks

• Investing in the largest companies

• Avoiding market fluctuations

• Earning a return higher than the S&P 500 index

How do active investors aim to exploit market inefficiencies?

• By holding stocks for the long term

• By avoiding stock market investments

• By investing in index funds

• By buying undervalued stocks

What is the primary belief of passive investors regarding market inefficiencies?

• They are irrelevant to stock prices

• They balance out over time

• They only affect small companies

• They can be exploited for short-term gains

Which investment strategy involves holding a diverse selection of stocks to represent the market?

• Short selling

• Index fund investing

• Day trading

• Active investing