As an investor, what importance do common stock prices have?

Stock prices along with the dividend paid on stocks are the two
most important factors that affect the return on investment earned by a person investing in
stocks. The market prices of the stock of any company at which the stock can be purchased and
sold changes from time to time depending on number of factors. The return on investment on the
stock depends on the fluctuations in price between the time of purchase and sale of the stocks by
the investor. In addition, the dividend paid on the stock during this period also adds to the
profit.

An investor makes profit on investment when the total of the
rise in price of the stock and the dividend paid is positive. The investor makes a loss when this
sum is negative. Thus the investor must try and purchase and sale of stocks in such a way that
stocks purchase give maximum return in form of price rise and dividend after the purchase. Also
investor must try to sell off the stocks held if the market prices are likely to fall in
future.

As can be seen from the above discussion, an investor must
be more concerned with price fluctuations of the stock rather than the absolute price to make
profit by way of increase in market price. However when considering the return by way of
dividend, the absolute price is also important.