Ask the Fool

Q I recently bought some stock. The shares rose for a while, but then started falling. Why can’t I find any explanation in the news? — K.W., Biloxi, Mississippi

A The stock market — and individual stocks, as well — rarely goes up or down in a straight line. Stocks tend to go up on some days and down on others, but over the long term, sound stocks will appreciate. Sometimes stocks move in response to news about the company, the industry or the overall economy — and sometimes they move for no reason at all. Remember that the stock price reflects what people are willing to buy and sell it for at the moment — and sentiment can change quickly.

Don’t worry about short-term volatility. Focus on what you think the stock is really worth, ideally buying when it’s well below that and selling when it nears or passes that. Or just hang on as long as the company remains healthy and growing. The prices that matter are the price you bought at and the price you eventually sell at.

Q What is the yield curve? — D.C., Philadelphia

A It’s a little tricky to explain, but imagine a simple graph — with yield (measured in percentage points) on the vertical axis and maturity (measured in time) on the horizontal axis. You can take current U.S. Treasury bonds with maturities of three months, two years, five years and 30 years and plot their yields on the graph. Draw a line through all the points, and you’ll have a yield curve. If the curve is sloping upward, it’s considered a “normal” curve. It reflects higher interest rates for longer maturities, and suggests that rates may continue to rise.