Are large companies more profitable than small ones?
"There is no general theory to support the notion that larger companies will be more profitable than smaller companies.  Economies of scale are not always positive, one can have diseconomies of scale too.   It is more common to talk about an optimal firm size, even going back to Stigler's (1958) ""The Economies of Scale.""  Intuitively, if economies of scale extended indefinitely, then natural monopolies would dominate all industries in the long run. A profit ratio, unfortunately, wouldn't quite get at scale economies.  Consider, for example, that the denominator of your metric would be profit+cost and that you are trying to get at the cost reduction that derives from scale.  Then, you are measuring the size of a company by the exact metric that should be reduced if scale economies exist, so the calculation would be a bit confounded. It is my understanding that such assessments are usually conducted at the industry level by determining whether the industry is becoming increasingly concentrated among fewer firms over time. (Again see Stigler).   If concentration is increasing, there is an implication that, at current firm sizes, there are economies of scale in the industry." "This isn't as rigorous as it should be, but may offer some useful insight into how big and small companies differ operationally. Putting Apple aside, larger companies tend to sell larger volumes of products (even if they're MRI devices, or turbines) relative to what smaller companies can sell (obviously, in absolute terms as well).  They are also able to negotiate volume discounts as well as payment terms.  This allows them to finance sales through their supply chain.  However, their large direct competitors are able to do the same thing as well.  Competitive forces then drive prices down. Smaller businesses, without these advantages of scale, tend to have to charge higher margins since they have to pay directly (and, if their clients are large businesses, finance the sale). Small businesses still have higher proportional costs of operation.  Sadly, my reference here is a study I performed for the South African Revenue Service about ten years ago, and not available online. However, the time taken by a small business to manage admin, tax, HR is a greater proportion of revenue than for larger companies. If the small business is a start-up with big investment from venture finance, then they could subsidise their selling price, run at a loss and try and gain scale.  Funnily enough, there is a fantastic article on this by Joel Spolsky (Ben and Jerry's vs. Amazon) For the average highly-competitive smaller company, the best choice is to chase design/quality/premium markets in order to justify the higher margins they have to charge.   And that's what makes Apple interesting as a case study.  They were a small company in the presence of giants (Intel, Microsoft, IBM).  They were ""forced"" to concentrate on design and premium markets in order to justify their need for higher margins.  It almost didn't work but then they broke through.  Now they're in the unique position of having gained scale but are still small enough relative to other electronics manufacturers to continue charging that premium (by volume their sales are still relatively small but their margins make them a giant). This type of variation from market to market makes developing some sort of generalised solution very unlikely but the general requirement holds: that smaller companies must charge higher margins in order to create equivalent profits to larger companies which must gain scale through volume." Small companies could have growth prospects. Large companies may not have that many. So look at ROE of companies by quatile to determine which companies have better growth.
You should not look at volume in isolation but look at it together with other indicators and/or the release of news (good or bad). When there is lower than average volume this could be an indication that the stock is in a bit of a holding pattern, possibly waiting for some company or economic news to come out (especially when accompanied by small changes in price). It could also mean that trading in a certain direction is drying up and the trend is about to end (this could be accompanied with a large move in price). When there is higher than average volume (2 to 3 times more or higher), this could be due to the release of company results, company or economic news, or the start or end of a trend (especially if accompanied by a gap). A large increase in volume accompanied by a large fall in price (usually a gap down) may also be an indication the stock has gone ex-dividend. There could be a range of reasons for variations in volume to the average volume. That is why you need to look at other indicators, company reporting and news, and economic news in combination with the volume changes to get a grasp of what is really happening. tl;dr- libor plus a small (&lt;50bps) spread for S&amp;P500 exposure. larger spread for less liquid/ more esoteric index.   a swap is basically just outsourcing balance sheet to a dealer bank. the counterparty (dealer) is shorting you (the fund) the return of the index. to hedge their short, the dealer would borrow funds and buy the stocks in the index. large dealer banks can borrow at basically libor. they'll also expect compensation for the transaction costs of buying the hedge plus a profit on the (small amount) of capital they need to finance this transaction. this will vary based on the size of the portfolio.   s&amp;p500 costs maybe 5bps in transaction cost. an EM index costs maybe 50bps. so it will depend on the index.  profit to the dealer depends on supply/demand dynamics. sometimes this transaction will be in demand, sometimes the short side will be more valuable.   so it depends on the index you're talking about as well as market dynamics. right now for s&amp;p500 exposure, not more than libor plus 50 for a mid-sized fund. You can also grow your produce, cook your own food, hell you can make your own electronics if you want to, and yet supermarkets, restaurants, and tech companies all seem to be doing fine.   Just because weed has been decriminalized doesn't mean that people have the experience and knowledge to grow it or want to invest the time and effort to make it a successful venture. To my knowledge, you also have to be licensed to both grow and sell it, and holding small quantities is legal...if you're just some guy growing 1,000 plants in the woods and holding 500 pounds in your basement, you're going to get shut down and arrested.   Have you not seen the great success of weed stores in places like Colorado? They offer far more than just weed in Ziplock baggies. If weed becomes legal nationally in the US, you will absolutely see large companies form for the exact reason that they form in every other industry: it's cheaper to consolidate operations and greater volume of sales means higher profit. "A growth fund is looking to invest in stocks that will appreciate in stock price over time as the companies grow revenues and market share. A dividend fund is looking to invest in stocks of companies that pay dividends per share.  These may also be called ""income"" funds. In general, growth stocks tend to be younger companies and tend to have a higher volatility - larger up and down swings in stock price as compared to more established companies.  So, growth stocks are a little riskier than stocks of more established/stable companies. Stocks that pay dividends are usually more established companies with a good revenue stream and well established market share who don't expect to grow the company by leaps and bounds.  Having a stable balance sheet over several years and paying dividends to shareholders tends to stabilize the stock price - lower volatility, less speculation, smaller swings in stock price.  So, income stocks are considered lower risk than growth stocks.   Funds that invest in dividend stocks are looking for steady reliable returns - not necessarily the highest possible return. They will favor lower, more reliable returns in order to avoid the drama of high volatility and possible loss of capital. Funds that invest in growth stocks are looking for higher returns, but with that comes a greater risk of losing value.  If the fund manager believes an industry sector is on a growth path, the fund may invest in several small promising companies in the hopes that one or two of them will do very well and make up for lackluster performance by the rest. As with all stock investments, there are no guarantees.  Investing in funds instead of individual stocks allows you invest in multiple companies to ride the average - avoid large losses if a single company takes a sudden downturn.  Dividend funds can lose value if the market in general or the industry sector that the fund focuses on takes a downturn." all other things being equal if you have two stocks, both with a P/E   of 2, and one has an EPS of 5 whereas the other has an EPS of 10 is   the latter a better purchase? What this really boils down to is the number of shares a company has outstanding.  Given the same earnings & P/E, a company with fewer shares will have a higher EPS than a company with more shares.  Knowing that, I don't think the number of shares has much if anything to do with the quality of a company.   It's similar to the arguments I hear often from people new to investing where they think that a company with a share price of $100/share must be better than a company with a share price of $30/share simply because the share price is higher. "Buying shares back is an indication that the company has nothing better to do with their money.  True.  However, buying the shares back is essentially moving money around, the firms (or individuals) they buy from, will invest their money differently.  Mergers and acquisitions are productive though.  The idea is that you combine things to work more efficiently.  For example, a small startup might have a great product but not a lot of infrastructure or cash.  So the big guys with both buy em up.  Or, big companies might have redundant expenditures in infrastructure or employees, and by merging they can produce more efficiently.  The term you keep using ""real economy"" is a strange one.  The above parties are part of the real economy.  Really.  What, may I ask, is your education in economics?  What books have you read on the subject, classes taken, jobs worked, podcasts listened to, etcetera, that are giving you these ideas?" There's really not a simple yes/no answer.  It depends on whether you're doing short term trading or long term investing.  In the short term, it's not much different from sports betting (and would be almost an exact match if the bettors also got a percentage of the team's ticket sales), In the long term, though, your profit mostly comes from the growth of the company.  As a company - Apple, say, or Tesla - increases sales of iPhones or electric cars, it either pays out some of the income as dividends, or invests them in growing the company, so it becomes more valuable.  If you bought shares cheaply way back when, you profit from this increase when you sell them.  The person buying it doesn't lose, as s/he buys at today's market value in anticipation of continued growth.  Of course there's a risk that the value will go down in the future instead of up. Of course, there are also psychological factors, say when people buy Apple or Tesla because they're popular, instead of at a rational valuation.  Or when people start panic-selling, as in the '08 crash.  So then their loss is your gain - assuming you didn't panic, of course :-) "Corporate bankruptcy is yet another program that can benefit the wealthy at the expense of the little guy.  A few years ago I had a trading account with a large company known as Refco.  They filled for bankruptcy and I was shocked to learn that my personal funds in my trading account were seized and used to pay of ""secured creditors"" which were companies like Bank of America.  I was lucky to get back 3 cents on the dollar.    TL:DR - large companies use bankruptcy to screw over the little guys"