Investing Trends

Most people believe the stock market is a nothing sum of money game because there is a buyer for each marketer and marketer for each buyer so each calls off the other and everything is equal. Not quite.

There are also-rans here, both the buyer and the marketer because each 1 paid a committee to purchase and a second committee to sell. This eats away at the net income of the victor and adds to the loss of the marketer if he sold for less than he paid.

How makes buying and merchandising of a stock consequence the company? When you purchase gram stock from your broker he is completing a transaction between you, the buyer, and person else, the seller. The company have nil to make with the transaction other than change the name of the shareholder on their record books. It have no consequence on the corporation’s finances. It is merely an expression by an individual; monetary fund or pension program that they believe the company’s stock will travel up.

There is one clip that buying a company’s stock makes impact their underside line. That is when you purchase a new offering called an Initial Populace Offering or IPO. The money that you pay for that stock then travels directly to the company and not to another individual. That cash is used as the company sees tantrum usually to fund enlargement to increase both sales and profits.

Now believe for a minute about the people who decided to sell their stock in Phillip Esther Morris because they did not desire to have a baccy company stock. Volition this brand any difference to the company? Not a twit. The individual who bought that stock was interested in lone 1 thing – volition it travel up so I can do a profit? That is why socially responsible investment do no sense at all. It only do the individual feel better and is not a true investing decision.

Let’s state you bought a stock at $20/share and sold it at $40. Double your money. Great. The cat that bought it sold it at $60 and that individual sold it to person for $80/share. Everyone is happy. So far. But this last stock buyer now watches the stock caput down and he make up one's minds to get out at $60. Mr. $60 tickers it drop to $20 where it deceases and makes not recover. Sounds like Lucent doesn’t it? The last 2 buyers don’t believe this is a nothing sum of money game.

Let me add that I believe the smartest cat in the clump was the 1 who took his loss and sold out at $60. He limited his loss and still have money left to happen a better issue. He was smart adequate not to “wait for it to travel back up so he could get out even”. Unfortunately, most people believe this way. It may be close to a nothing sum of money game, but you don’t desire to stop up with the zero.

Copyright 2005