full transcript

From the Ted Talk by Richard Coffin: How do investors choose stocks?

Unscramble the Blue Letters


Active investors aim to exploit the short term, “voting machine” aspect of the market. They believe the market contains inefficiencies: that stock prices at any given point in time may oevualvre some companies, undervalue others, or fail to rlceeft developments that will impact the market. Active investors hope to exploit these inefficiencies by buying stocks they think are pericd low. To ideiftny undervalued stocks, they may investigate a company’s business operations, analyze its financial statements, observe price trends, or use algorithms.

Passive investors, by contrast, put their faith in the long term “weighing machine” aspect of the market. They believe that even though markets may exihbit ifceefinneciis at any given pniot, over time those inefficiencies balance out— so if they buy a selection of stocks that represents a cross-section of the mkreat, over time it will grow. This is usually aiohccpselmd through iendx funds, cllnoetocis of stocks that represent the broader market. The S&P 500 index is one of many indexes. The overall goal is the same for all index funds: to hold skcots for the long term and ignroe short-term market fluctuations.

Open Cloze


Active investors aim to exploit the short term, “voting machine” aspect of the market. They believe the market contains inefficiencies: that stock prices at any given point in time may _________ some companies, undervalue others, or fail to _______ developments that will impact the market. Active investors hope to exploit these inefficiencies by buying stocks they think are ______ low. To ________ undervalued stocks, they may investigate a company’s business operations, analyze its financial statements, observe price trends, or use algorithms.

Passive investors, by contrast, put their faith in the long term “weighing machine” aspect of the market. They believe that even though markets may _______ ______________ at any given _____, over time those inefficiencies balance out— so if they buy a selection of stocks that represents a cross-section of the ______, over time it will grow. This is usually ____________ through _____ funds, ___________ of stocks that represent the broader market. The S&P 500 index is one of many indexes. The overall goal is the same for all index funds: to hold ______ for the long term and ______ short-term market fluctuations.

Solution


  1. collections
  2. inefficiencies
  3. exhibit
  4. index
  5. accomplished
  6. priced
  7. point
  8. stocks
  9. market
  10. reflect
  11. ignore
  12. identify
  13. overvalue

Original Text


Active investors aim to exploit the short term, “voting machine” aspect of the market. They believe the market contains inefficiencies: that stock prices at any given point in time may overvalue some companies, undervalue others, or fail to reflect developments that will impact the market. Active investors hope to exploit these inefficiencies by buying stocks they think are priced low. To identify undervalued stocks, they may investigate a company’s business operations, analyze its financial statements, observe price trends, or use algorithms.

Passive investors, by contrast, put their faith in the long term “weighing machine” aspect of the market. They believe that even though markets may exhibit inefficiencies at any given point, over time those inefficiencies balance out— so if they buy a selection of stocks that represents a cross-section of the market, over time it will grow. This is usually accomplished through index funds, collections of stocks that represent the broader market. The S&P 500 index is one of many indexes. The overall goal is the same for all index funds: to hold stocks for the long term and ignore short-term market fluctuations.

Frequently Occurring Word Combinations


ngrams of length 2

collocation frequency
investors aim 3
active investors 3
long term 3
faster rate 2
stock prices 2
passive investing 2


Important Words


  1. accomplished
  2. active
  3. aim
  4. algorithms
  5. analyze
  6. aspect
  7. balance
  8. broader
  9. business
  10. buy
  11. buying
  12. collections
  13. companies
  14. contrast
  15. developments
  16. exhibit
  17. exploit
  18. fail
  19. faith
  20. financial
  21. fluctuations
  22. funds
  23. goal
  24. grow
  25. hold
  26. hope
  27. identify
  28. ignore
  29. impact
  30. index
  31. indexes
  32. inefficiencies
  33. investigate
  34. investors
  35. long
  36. market
  37. markets
  38. observe
  39. operations
  40. overvalue
  41. passive
  42. point
  43. price
  44. priced
  45. prices
  46. put
  47. reflect
  48. represent
  49. represents
  50. selection
  51. short
  52. statements
  53. stock
  54. stocks
  55. term
  56. time
  57. trends
  58. undervalue
  59. undervalued