Hi Traverse.

Thanks for the comment. This is one of those comments I had to actually go and think for a while before responding, which means it’s a good contribution to the discussion!

While I agree with your broader point about stock prices not always reflecting the current profitability of a company.

I don’t agree that investing is gambling unless you are talking about investing in a single stock because then you open yourself up to the possibility of “total loss” and unrecoverable losses. As I wrote about here on why stock-picking “is a losing game”

Stock prices are typically valued based off the discounted cash flow of each company. Different companies have different discount rate depending on how the market feels about the future outlook of that company. That’s how we end up with “growth stocks” Like say Netflix and “value stocks” which have a lower share price relative to their current earnings.

Are some companies over valued, probably. But when the market discovers new information the price will drop. That’s why I stick with globally diversified ETFs.

Thanks for the great comment.


Economic policy wonk by day. Personal finance writer by night. I write about investing, debt, and all things related to money. Editor of Making of a Millionaire

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store