quote:

Originally posted by rizzle:
This thing came about from watching a rise and fall video of Buffalo NY. Everything was super fine and dandy until the big market crash in the late 20's.
A lot of big businesses closed down, and I thought the reason they lost money was that the stocks crashed, and that it was company money lost from stock value.

No, the reason so many companies went bankrupt in the crash of 1929 is the widespread sudden loss of wealth that dried up overall consumer spending. Shrinking sales along with severe deflation that decimated profit margins.

https://www.warriortrading.com...5mUJ9_KrqWJR5MtqVDzP

How the Stock Market Works – Everything You Need to Know

How the Market Works
The idea of investing in the stock market may seem scary especially if it is your first time trying it. Many people end up being discouraged by the sad stories of investors losing most or all of their money.

But the stock market also provides plenty of opportunity to grow your wealth with the click of a couple buttons on your computer. So let’s take a look at how the stock market works and how you can use it to your advantage.

What is a Stock?
Also called a share or equity, stocks are a financial instrument that signifies a percentage of ownership in a company or a corporation. It represents a claim on a fraction of a company’s assets and earnings.

A stock owner is a person who owns a certain percentage of the corporation that is equivalent to the number of shares held which is a fraction of the company’s total outstanding shares. For example, if an investor owns 200,000 shares of a company with 4 million outstanding shares, he or she would have a 5% ownership stake in it.

Different Types of Stocks
There are three types of stocks:

1. Common Stock
The common shares carry the voting rights which enable an investor to have a say in the company’s meetings. However, voting rights are not equal. Companies may give the shareholder one or two or multiple votes according to the shares held.

2. Preferred Stock
The preferred shares, on the other hand, do not come with the voting rights because one gets to choose the preference in an organization to receive dividends and assets in case of liquidation. In other words, if a company becomes bankrupt, preferred stocks dividends will be paid after the company debts.

3. Dividend-Producing Stock
A company may decide to pass a dividend to the shareholders depending on the profit they have earned. Dividends are some form of reward to an organization’s shareholders and are totally determined by the company, which means that the corporation may increase or decrease the dividends as it pleases.

How Do Stocks Work?
The stock market is like an auction platform where investors buy and sell shares of stocks based on the highest price willing to be paid by a buyer and the lowest price a seller is willing to sell their shares for.

Stock prices are a representation of supply and demand and when it is lopsided prices move. For example, if there are more sellers than buyers then supply outweighs demand and prices will fall and vice versa.

Sellers try to sell each shares as high as possible hoping that they will get more than what they paid for it while stock buyers strive to get the lowest price possible to obtain the best deal.

The difference between what a seller is willing to sell for and what a buyer is willing to pay is known as the spread. So if a stock has a buyer at $10 and the lowest seller is at $10.25 then the difference between those two numbers is the spread, which is $0.25.

How do I invest in the Stock Market?
Unfortunately, only investors with large accounts can trade on the floor of the stock exchange. However, if you want to trade stocks you can open an account with an online broker for a generally cheap commission. Your options include hiring:

• Financial Advisors who usually charge an annual fee or per transaction fee
• Large banks which in addition to executing trades will also provide financial planning
• Online brokers who charge a small fee for every transaction

A majority of investors will buy stocks through mutual funds, which are companies that buy a collection of stocks and hold them in a fund and then sell shares of that fund to investors. Instead of owning shares in the mutual fund, the investor can choose to buy the stocks directly depending on your financial goals and time horizon. Mutual Funds are a diversified investment which means they tend to carry less risk than owning a single stock outright.

However, some investors like picking the companies they own and will buy them individually. The best way to do this is by selecting strong companies with a track record of growth or sustainability. This reduces your risk and gives you a better chance at making a profit.

What Determines the Stock Price?
Stock prices tend to go up and down over time depending on the supply and demand. The change in prices is a direct result of supply and demand. If a stock is on high demand due to the recent success of the company or a strong industry sector, its prices tend to go up because their are more buyers than sellers.

On the other hand, if investors are not willing to buy a stock due to the company posting weak earnings or guidance, its price will fall because there will be more sellers than buyers creating more supply of the stock in the marketplace.

Final Thoughts
With any investment, there are risks, and the stock market is no different. By understanding how the stock market works you put yourself in a better position to make smarter, more informed decisions.

quote:

Originally posted by fritz:

Financial diversification gets folks through challenging times. The long-run approach to investing has shown success for folks from all levels of net worth.

To go a step past that, being in a position to acquire during a severe downturn can make fortunes. On a smaller scale, being essentially debt-free and having savings when there is a downturn will make for an outstanding opportunity for the common person.

It can mean buying stocks at a severe discount (I would suggest buying indexes unless one is thoroughly familiar with an individual stock), with the knowledge it may still go down some but in just a couple of years will go up a lot. It can mean acquiring that thing you wanted. For me it was an expensive as-new guitar which someone sold in distress during the great financial crisis.

Being diversified and having cash-like assets available to buy when the opportunity arises is the key.

quote:

Originally posted by HRK:

quote:

No, it is no longer "your company," you sold it to 1 million people who each own 1/1,000,000 of the company. It is their company now.

Not necessarily, it depends on how many total shares were issued when the company was founded. When it started, or later on by board decree, the total shares could be 4 million, and the board has agreed to sell 1 million to raise capital for operations.

So you don't lose control in that situation, the company now has shareholder investors who make up 25% of the stock. Shareholder voting will be determined by stock type and the bylaws of the company, but that block could vote to get a seat on the board with that percentage.

Selling stock privately or publicly doesn't mean the company sold EVERY share

His point is still valid, you were incorrect when saying the company still had the original 1mil in assets plus the 1 mil in cash. The company has in fact given up some portion of the value of the assets of the company when selling the stock. As you point out depending on the percentage of the authorized shares of the company sold.

quote:

Originally posted by HRK:
or later on by board decree, the total shares could be 4 million, and the board has agreed to sell 1 million to raise capital for operations.

No Board is going to arbitrarily "issue" the company an additional 3 millions shares of capital stock AFTER an IPO. Well, they could, but they just decreased the shareholders value by 75% and should make sure they have the armor set up on the windows and doors.

Well, I learned a lot here. Main thing was the IPO is the only money kept from the company (unless they sell more afterwards). And for what ever reason, that stock value does not effect company (cash) value.
I think watching the news over time that it would say so and so company lost a million today from stock drop, it wasn't the company, it was shareholders.
Buch of smart old people in here.
Thanks guys!

quote:

Bunch of smart old people in here.

Buy low, sell high.

Maybe I'll open a dental floss testing facility in Montana.
Get Moon Zappa for CEO.
Do some super outstanding marketing.
Go Public, IPO at $500. a share.
Expect to sell 5 million shares, take a little off the top for me and retire in Tahiti.

^^^ Just you and the pygmy pony?

Got to have those "zircon-encrusted tweezers".

quote:

Originally posted by rizzle:
Well, I learned a lot here. Main thing was the IPO is the only money kept from the company (unless they sell more afterwards). And for what ever reason, that stock value does not effect company (cash) value.
I think watching the news over time that it would say so and so company lost a million today from stock drop, it wasn't the company, it was shareholders.
Buch of smart old people in here.
Thanks guys!

Stock price= what you (or your city for property tax purposes) think your house is worth

Company value= what a buyer is actually willing to give you when you go to sell your house.

Usually they go hand in hand, but what something is valued at isn't necessarily what it can be sold for.

quote:

Originally posted by architect:
[.

Buy low, sell high. [/QUOTE]

• Past performance is not indicative of future results.
  
• Markets Can Remain Irrational Longer Than You Can Remain Solvent
  
• Don’t Try to Catch a Falling Knife
  
• The Market will flucuate

[/QUOTE]

Funny thing about the "buy low".
I was working for FCX (copper) back when shares were around $3.50, everyone thought we were going to get bought out. No yearly bonus, no spending money on supplies. Now it's around $70.00. That is one time that I wish I would have spent $10k buying low.
You never know though, it could of gone the other way.

quote:

Someone once said (via Jack Bogle): in the short term, the market is a voting machine and in the long term an adding machine.
I guess timing is everything.

So, how I understand it, is this:

A) It’s a wager. The index fund investor is betting that, on a whole, he is better off getting a piece of every Musk, Bezos, Buffet, etc and chancing the Enrons and the Maidoffs.

B) It only works if “culturalist” and nationalist.

It requires white* American culture in leadership, accounting and compliance. Its success is an outgrowth of that culture.

It may only work with males from that culture.

American culture is a combination of Anglo risk taking, Germanic diligence, morals and long term planning, and agrarian pragmatism.

It is more moral than the Anglo Pirate/Viking culture, and more flexible and realistic than the Germanic.

(*A third generation Howard grad, 1st gen Hmong or Vietnamese from Houston, etc are all culturally “white” American.)

Watch the series "Billions" and "House of Cards". The financial markets really are that corrupt.

Realize that the game is rigged by the big and powerful, so you are never going to outsmart The Market. You may get lucky once or twice, but you'll be unlucky a hundred times. You can be so very right yet lose your money when the big money pushes the market where they want it to go. BTDT more than once!

What you can do is recognize the real rules and paint within those lines. Avoid tips and hype, because you're by far not early on the bandwagon, and most likely you're being played by the big money. Be the remora fish that attaches to the shark, and let it take you for a ride.

Get a basic understanding by reading a few books, watching some reputable youtube channels, and learn to read charts at least a bit.

The weird part is the…. Self delusion they have. I know a couple of serious finance people.

They are sincerely convinced that it has to be them and their friends “in control,” to “keep the system safe.”

It’s not just ego or greed.

It’s something similar to what Soviet military had to loose, what American bureaucracy will have to lose.

Facing that you are not the “good guy” is tough.

No one ever bet enough on the winning horse.