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I’m acting on the fact that almost all my investments are in the S&P 500, and I don’t have a (easy) way to pick my favorite 450 out of those 500. How would kno

• nostrademons 7y ago
  They'd be priced low. There is no "should" when it comes to markets - the market price is whatever people will transact at. The problem is that stock price movements depend upon future events - making money in the markets is effectively a future-prediction problem. So if your strategy is to discard the bottom 10%, great, you got rid of Foot Locker and Sears. You also would've gotten rid of Apple in 1998, which was responsible for a good portion of the index's gains over the last 20 years. And you would've kept losers like PG&E, which went bankrupt over a black-swan event (they were doing fine until they burned down a town).
• vitaflo 7y ago
  Prices of stock are based on future expectation of earnings. This is why you can have a company like Amazon have incredible earnings, but still have the share price tank. IE, expectations were that they would have even more incredible earnings, but they were merely incredible. This is also how you can have companies that are on the verge of bankruptcy get huge stock gains if they defy earnings expectations. As such, expectations of future results are already priced into stocks. It's literally the stock price. Whether a stock moves up or down is based on the delta between reality and expectation.