Do most corporations target a 10% to 15% yearly growth?
I noticed companies in QQQ typically can grow 10% annual, as the rate of growth from 1990 to 2022 has been 10% per year on average. So is that how corporations do it? Perhaps target 15% growth for the cash flow or net income, and then some departments may disappoint, but overall they make it at 10%, and at that rate, they can already double in 7 years, and quadruple in 14 years, and 8x in 21 years. Such growth can be Google trying to make people subscribe to their storage, or Apple trying to make people subscribe to their Apple Music or exploring new markets such as rumored Apple glass or VR glass. #investment #growth #personalfinance
You are thinking too specifically Every public company has a fiduciary duty to maximize shareholder value. The way they do that is determined by their leaders and board members, and typically well known to the shareholders and the public (along with the risks involved) *How* they do this and what their specific goals are varied by company Yes it turns out the average annual returns for US public corporations is around 10-11% historically. That doesn't mean every company has a target to grow earnings by 10%, but they probably are looking for ways to somehow add more value, which could mean growing revenue, growing profit, distributing $ back to shareholders, being sold for a higher value, etc etc This can be challenging for any company, but especially so for these megacorps like aapl and goog. Scale is much more massive which can make them slower moving, and there are antitrust complications with entering adjacent markets
Keep in mind that QQQ (and other actively managed market indexes) are rebalanced and reconstituted on a periodic basis. In other words, losers are removed from the index over time. So there’s some survivorship bias going on here. Not every company will be able to perpetually grow the same way Apple/Google/etc can.
that's interesting... so if we invest in QQQ... then the QQQ team would slowly dump the laggers (or losers) and also slow buying up the "new winners"... I suppose. Meaning if Number 500 and 499 moved to 521 and 535, then they would be sold slowly and the new 499 and 500 would be bought.
Yup you’ve got the right idea. Bottom performers will be removed, up and coming stocks will be added. You might find this article interesting for the 2021 QQQ additions and removals: https://www.globenewswire.com/news-release/2021/12/11/2350269/6948/en/Annual-Changes-to-the-Nasdaq-100-Index.html