query: Where does the money go when I buy stocks?

positive: "When you buy a share of stock, you are almost always buying from someone who previously purchased that share and now wants to sell it. The money -- minus broker's fee -- goes to that other investor, which may be a person, a company (rarely the company that issued the stock, but that will occasionally be the case), an investment fund, the ""market maker"" for that stock (websearch for definition of that term), or anyone else. They owned a small percentage of the company; you bought it from them and gave them the money for it, just as you would buy anything else. You don't know or care who you bought from; they don't know or care who they sold to; the market just found a buyer and seller who could agree on the price. There are a very few exceptions to that. The company may repurchase some of its own shares and/or sell them again, depending on its own financial needs and obligations. For example, my own employer has to purchase its own shares periodically so it has enough on hand to sell to employees at a slight discount  through the Employee Stock Ownership Program. But you generally don't know that's who you're selling to; it happens like any other transaction. And during the Initial Public Offering, if you're lucky/privileged enough to get in on the first wave of purchases, you're buying from the investment bank that's managing this process ... though that's an almost vanishingly rare case for ""retail"" investors like us; we're more likely to get the shares after someone has already pushed the price up a bit. But really, when you buy a share the money goes to whoever you bought it from, and that's all you can know or need to know."

positive: The money goes to the seller.  There are a lot of behind the scenes things that happen, and some transactions are very complicated with many parties involved (evidenced by all the comments on @keshlam's perfectly reasonable high-level answer), but ultimately the money goes to the seller.  Sometimes the seller is the company.  The billions of shares that change hands each day are moving between other individuals like you and investment funds; these transactions have no direct impact on the company's financials, in general.

negative: "Seems like no one in this thread has heard of ""treasury stocks"", which indeed allow a company to own and sell its own stock. Think about it. When there is a stock buy-back funded by excess profits, where does that stock go?"

negative: "Support and resistance points indicate price levels where there have been a large amount of trading activity, usually from institutions, that tend to stabilize the price of a stock. Support is a temporary FLOOR, where people have been buying in large quantities. That means there's a good chance that the stock won't go below this level in the near term. (But if it does, watch out.) Resistance is a temporary CEILING where people have been selling. When the stock price hits this level, people tend to sell, and push it back down. Until there are ""no more"" sellers at this level. Then the price could skyrocket if there is enough buying."

negative: "Arbitrage is basically taking advantage of a difference in price.  Generally extending to ""in different places for the same thing"". A monetary version would be interlisted stocks, that is stocks in companies that are on both the NYSE/Nasdaq and Toronto stock exchanges.  If somebody comes along and buys a large number of shares in Toronto, that will tend to make the price go up - standard supply and demand. But if someone else can buy shares instead in NY, and then sell them in Toronto where the first person is buying up shares, where the price is higher, they the the arbitrageur (second person) can make pretty easy money. By its very nature, this tends to bring the prices back in line, as NY will then go up and Toronto will then go down (ignoring FX rates and the like for ease of explanation). The same can work for physical goods, although it does tend to get more complex with taxes, duties, and the like."

negative: I don't want to get involved in trading chasing immediate profit  That is the best part. There is an answer in the other question, where a guy only invested in small amounts and had a big sum by the time he retired. There is good logic in the answer. If you put in lump sum in a single stroke you will get at a single price. But if you distribute it over a time, you will get opportunities to buy at favorable prices, because that is an inherent behavior of stocks. They inherently go up and down, don't remain stable. Stock markets are for everybody rich or poor as long as you have money, doesn't matter in millions or hundreds, to invest and you select stocks with proper research and with a long term view. Investment should always start in small amounts before you graduate to investing in bigger amounts. Gives you ample time to learn. Where do I go to do this ?  To a bank ? To the company, most probably a brokerage firm. Any place to your liking. Check how much they charge for brokerage, annual charges and what all services they provide. Compare them online on what services you require, not what they provide ? Ask friends and colleagues and get their opinions. It is better to get firsthand knowledge about the products. Can the company I'm investing to be abroad? At the moment stay away from it, unless you are sure about it because you are starting. Can try buying ADRs, like in US. This is an option in UK. But they come with inherent risk. How much do you know about the country where the company does its business ? Will I be subject to some fees I must care about after I buy a stock? Yes, capital gains tax will be levied and stamp duties and all.

negative: This is a very good question! The biggest difference is that when you put money in a savings bank you are a lender that is protected by the government, and when you buy stocks you become an owner. As a lender, whether the bank makes or loses money on the loans it makes, they still maintain your balance and pay you interest, and your principal balance is guaranteed by the government (in the USA). The bank is the party that is primarily at risk if their business does not perform well. As an owner, you participate fully in the company's gains and losses, but you also put your money at risk, since if the company loses money, you do too. Because of this, many people prefer to buy funds made up of many stocks, so they are not at risk of one company performing very poorly or going bankrupt. When you buy stock you become a part owner and share in the profitability of the company, often through a dividend. You should also be aware that stocks often have years where they do very poorly as well as years when they do very well. However, over a long period of time (10 years or more), they have historically done better in outpacing inflation than any other type of investment. For this reason, I would recommend that you only invest in the stock market if you expect to be able to leave the money there for 10 years or more, ideally, and for 5 years at the very least. Otherwise, you may need to take the money out at a bad time. I would also recommend that you only invest in stocks if you already have an emergency fund, and don't have consumer debt. There isn't much point in putting your money at risk to get a return if you can get a risk-free return by paying off debt, or if you would have to pull your money back out if your car broke down or you lost your job.

negative: Yes, it can buy back the call, but much before stock hits the $30 mark.   Let us say you got 1$ from selling the call. So the total money in your account is 4$ + 1 $ = 5 $. When stock hits 10$ (your strike), the maintenance margin is 5$. As soon as stock goes past 10, your maintenance margin is violated. So broker will buy back your call (at least IB does that, it does not wait for a margin call). Now if the stock gapped up from 8 to 30,then yes, broker will buy it back at 30, so your account will have a negative balance. Assume the call cost 20$ when stock hit 30, your balance is: 5 - (30-10) = -15. Depending on broker, I suppose they will ask you to bring your account balance back up to positive. If they don't do that, they risk going out of business.

negative: Firstly a stock split is easy, for example each unit of stock is converted into 10 units.  So if you owned 1% of the company before the stock split, you will still own 1% after the stock split, but have 10 times the number of shares.   The company does not pay out any money when doing this and there is no effect on tax for the company or the share holder. Now onto stock dividend… When a company make a profit, the company gives some of the profit to the share holders as a dividend; this is normally paid in cash.  An investor may then wish to buy more shares in the company using the money from the dividend.      However buying shares used to have a large cost in broker charges etc. Therefore some companies allowed share holders to choose to have the dividend paid as shares.   The company buys enough of their own shares to cover the payout, only having one set of broker charges and then sends the correct number of shares to each share holder that has opted for a stock dividend.  (Along with any cash that was not enough to buy a complete share.) This made since when you had paper shares and admin costs where high for stock brokers.   It does not make sense these days. A stock dividend is taxed as if you had been paid the dividend in cash and then brought the stock yourself.

negative: "Offtopic, but what do you think of the idea of the stock market being a ""ponzi scheme""? I've had this same idea that [Mark Cuban reiterated well by writing](http://blogmaverick.com/2008/09/08/talking-stocks-and-money/): >Ive said a lot of this before. The stock market is by definition a ponzi scheme. As long as money keeps on coming in, then there is someone to take the stocks from the sellers. If the amount of money coming in is reduced, the stocks, indexes, et al go down. What if, for who knows whatever reason, the amount of money going into stocks declined significantly ? Who would buy stock from the sellers. I mean goodness gracious, you could see something disastrous happen. Like the Nasdaq dropping from 5000, to under 2000 in just a few years. Its happened before, it can happen again. > >Which is exactly why we get all these nonsensical commercials from brokerages. To keep the money coming in . I wish someone would index the amount of money spent on marketing by mutual funds and brokerages to the Nasdaq and Dow and see if it correlates. > >Money inflows drives the business. We can get all the economic data we ever dreamed of getting, but if money inflows declined significantly for an extended period of time, then every rule of thumb would go out the window until money started flowing in. Yes it would flow in eventually as prices dropped. From big investors like me who wouldnt have gotten hurt by a huge market decline and could come in and buy huge chunks, or companies outright. > >You ? You probably would be like Charles Ponzi’s customers. You wouldnt be able to get your money out of the fund when it went down, and by the time you did, it would be too late. You would have been crushed. > >Ive said it before, a stock that doesnt pay dividends is valued like a baseball card. Just whatever you can sell it for. The concept that you own “your share” of the company is a joke. You are completely at the whim of the CEO and board who will dilute you on a daily basis with stock options, then try to buy back stock to cover it up and push up the price, rewarding the shareholders who get out, rather than those that continue to hold the shares. Meaning you. > >Have you ever seen Warren Buffet talk about buying 100 shares of anything k shares ? or does he take control of , or purchase a material percentage of a company ? > >If you have enough money to have influence , take control or buy it outright, then the stock market can work for you. Thats why I buy stock in public companies that relate to my other business entities. When i pick up the phone and call the CEO of a company i own shares in, they call me back very quickly. When I ask if there are business opportunities that make sense for the company and another company of mine to work together, I wont always get the business, but I will always get a meeting. If Im smart about the investments I make, the more important returns come from the relationships with the companies than the action of the stock. > >If the best you can do is buy shares that are going to be continuously diluted, then you are merely a sucker. There is a good chance that the shares you bought came from shares an insider who got stock options. You just helped dilute yourself with your first share purchase. > >The wealthy can make the stockmarket work for them. Individuals buying shares of stock in non dividend paying stocks… they work for the stockmarket. > >I know Ive painted a pretty bleak picture. > >The stockmarket isnt going away. Would it shock me if the whole thing collapsed ? yes. it would. Its just too engrained in our way of life in the USA. What would change my mind is if a better investment vehicle came along. > >The stockmarket used to be about investing capital in companies that came public or did secondary offerings. That money was used to create amazing businesses and return dividends back to people who truly were investors. There once was a day where most companies paid dividends higher than the interest rates on their bonds. Why ? Because stocks are inherently more risky. If a company goes belly up, bondholders collect first, shareholders usually last. People could buy and hold stocks, and get paid real cash money for being a shareholder in the company at rates far higher than the divident yields we see today. If the company did well, the dividends went up. Investors who held, actually got all their money back in dividends at some point and the rest was gravy. The good ole days. > >But that changed when mutual funds came along and started marketing the concept of growth as a way to attract investors. > >Its not inconceivable that the old mindset could comeback. That a new market of stocks could be created where companies didnt continuously dilute shareholders by issuing stock and options to themselves. Where earnings were earned for the same reason they are in private companies, to not only fund growth, but also provide cash back to investors. Now if that market existed today. Where I could buy 100 shares of stock, and even if it represented just 1/100000 of ownership in the company, I could have confidence that year after year, I would still own 1/100000th of that company, and if that company generated earnings , I would have at least some of that money returned to me. Well then, that wouldnt be a ponzi scheme. That would be a true market of stocks, and I would be happy to recommend to anyone to be careful, but buying stocks in that market could be something worth considering if your appetite for risk canhandle it."

negative: If I invest X each month, where does X go - an existing (low yield)   bond, or a new bond (at the current interest rate)? This has to be viewed in a larger context.  If the fund has outflows greater than or equal to inflows then chances are there isn't any buying being done with your money as that cash is going to those selling their shares in the fund.  If though inflows are greater than outflows, there may be some new purchases or not.  Don't forget that the new purchase could be an existing bond as the fund has to maintain the duration of being a short-term, intermediate-term or long-term bond fund though there are some exceptions like convertibles or high yield where duration isn't likely a factor. Does that just depend on what the fund manager is doing at the time   (buying/selling)? No, it depends on the shares being created or redeemed as well as the manager's discretion. If I put Y into a fund, and leave it there for 50 years, where does Y   go when all of the bonds at the time I made the purchase mature?  You're missing that the fund may buy and sell bonds at various times as for example a long-term bond fund may not have issues nearing maturity because of what part of the yield curve it is to mimic. Does Y just get reinvested in new bonds at the interest rate at that time? Y gets mixed with the other money in the fund that may increase or decrease in value over time.  This is part of the risk in a bond fund where NAV can fluctuate versus a money market mutual fund where the NAV is somewhat fixed at $1/share.

negative: In short, thanks to the answers and comments posted so far.  No actual money is magically disappeared when the stock price goes down but the value is lost. The value changes of a stock is similar to the value changes of a house. The following is the long answer I came up with based on the previous answers and comments alone with my own understandings. Any experts who find any of the following is 200% out of place and wrong, feel free to edit it or make comments. Everything below only applies if the following are true: The stock price is only decreasing since the IPO because the company has been spending the money but not making profits after the IPO. The devaluation of the stock is not the result of any bad news related to the company but a direct translation of the money the company has lost by spending on whatever the company is doing. The actual money don’t just disappear into the thin air when the stock price goes down. All the money involved in trading this stock has already distributed to the sellers of this stock before the price went down.  There is no actual money that is literally disappeared, it was shifted from one hand to another, but again this already happened before the price went down.   For example, I bought some stocks for $100, then the price went down to $80. The $100 has already shifted from my hand to the seller before the price went down. I got the stock with less value, but the actual money $100 did not just go down to $80, it’s in the hand of the seller who sold the stock to me.  Now if I sell the stock to the same seller who sold the stock to me, then I lost $20, where did the $20 go? it went to the seller who sold the stock to me and then bought it back at a lower price. The seller ended up with the same amount of the stocks and the $20 from me. Did the seller made $20? Yes, but did the seller’s total assets increased? No, it’s still $100, $80 from the stocks, and $20 in cash. Did anyone made an extra $20? No. Although I did lost $20, but the total cash involved is still there, I have the $80 , the seller who sold the stock to me and then bought it back has the $20. The total cash value is still $100. Directly, I did lost $20 to the guy who sold me the stock when the stock has higher value and then bought it back at a lower price. But that guy did not increased his total assets by $20. The value of the stock is decreased, the total money $100 did not disappear, it ended up from one person holding it to 2 people holding it. I lost $20 and nobody gained $20, how is that possible? Assume the company of the stock never made any profit since it’s IPO, the company just keeps spending the money, to really track down where the $20 I lost is going, it is the company has indirectly spent that money. So who got that $20 I lost? It could be the company spent $20 for a birthday cake, the $20 went to the cake maker. The company never did anything to make that $20 back, so that $20 is lost. Again, assume the stock price only goes down after  its IPO, then buying this stock is similar to the buying a sport car example from JoeTaxpayer (in one of the answers), and buying an apple example from BrenBarn(in one of the comments from JoeTaxpayer’s answer).  Go back to the question, does the money disappears into the thin air when the value of the stock goes down? No, the money did not disappear, it switched hands. It went from the buyer of the stock to the company, and the company has spent that money. Then what happens when the stock price goes down because bad news about the company? I believe the actual money still did not just disappear. If the bad news turn out to be true that the company had indeed lost this much money, the money did not disappear, it’s been spent/lost by the company. If the bad news turn out to be false, the stock price will eventually go up again, the money is still in the hand of the company. As a summary, the money itself did not disappear no matter what happens, it just went from one wallet to another wallet in many different ways through the things people created that has a value.

negative: "Learn something new every day... I found this interesting and thought I'd throw my 2c in. Good description (I hope) from Short Selling: What is Short Selling First, let's describe what short selling means when you purchase shares of stock. In purchasing stocks, you buy a piece of ownership in the company. You buy/sell stock to gain/sell ownership of a company. When an investor goes long on an investment, it means that he or she has bought a stock believing its price will rise in the future. Conversely, when an investor goes short, he or she is anticipating a decrease in share price. Short selling is the selling of a stock that the seller doesn't own. More specifically, a short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered.  Still with us? Here's the skinny: when you short sell a stock, your broker will lend it to you. The stock will come from the brokerage's own inventory, from another one of the firm's customers, or from another brokerage firm. The shares are sold and the proceeds are credited to your account. Sooner or later, you must ""close"" the short by buying back the same number of shares (called covering) and returning them to your broker. If the price drops, you can buy back the stock at the lower price and make a profit on the difference. If the price of the stock rises, you have to buy it back at the higher price, and you lose money. So what happened? The Plan The Reality Lesson I never understood what ""Shorting a stock"" meant until today. Seems a bit risky for my blood, but I would assume this is an extreme example of what can go wrong. This guy literally chose the wrong time to short a stock that was, in all visible aspects, on the decline.  How often does a Large Company or Individual buy stock on the decline... and send that stock soaring? How often does a stock go up 100% in 24 hours? 600%?  Another example is recently when Oprah bought 10% of Weight Watchers and caused the stock to soar %105 in 24 hours. You would have rued the day you shorted that stock - on that particular day - if you believed enough to ""gamble"" on it going down in price."

negative: "It's not a ponzi scheme, and it does create value. I think you are confusing ""creating value"" and ""producing something"". The stock market does create value, but not in the same way as Toyota creates value by making a car. The stock market does not produce anything. The main way money enters the stock market is through investors investing and taking money out.   The only other cash flow is in through dividends and out when businesses go public.  &  The stock market goes up only when more people invest in it. Although the stock market keeps tabs on Businesses, the profits of Businesses do not actually flow into the Stock Market. Earnings are the in-flow that you are missing here. Business profits DO flow back into the stock market through earnings and dividends. Think about a private company: if it has $100,000 in profits for the year then the company keeps $100,000, but if that same company is publicly traded with  100,000 shares outstanding then, all else being equal, each of those shares went up by $1. When you buy stock, it is claimed that you own a small portion of the company. This statement has no backing, as you cannot exchange your stock for the company's assets. You can't go to an Apple store and try to pay with a stock certificate, but that doesn't mean the certificate doesn't have value. Using your agriculture example, you wouldn't be able to pay with a basket of tomatoes either. You wouldn't even be able to pay with a lump of gold! We used to do that. It was called the barter system.  Companies also do buy shares back from the market using company cash. Although they usually do it through clearing-houses that are capable of moving blocks of 1,000 shares at a time."

negative: "Ditto mhoran_psprep.  I'm not quite sure what you're asking. Where does the money come from? When someone starts a bank, they normally get together a bunch of investors -- perhaps people they know personally, perhaps they sell stock -- to raise initial capital. But most of the money in the bank comes from depositors. Fundamentally, what a bank does is take money from depositors and loan it to borrowers. (Banks also borrow money from other banks and from the government.) They charge the borrowers interest on the loan, and they pay depositors interest on their deposits. The difference between those two interest rates is where the bank gets their profit. Where does the money go when you pay it back? As mhoran_psprep said, some of it goes to pay interest to the depositors; some of it goes to pay the bank's expenses like employee salaries, cost of the building, etc; and some of it goes as profit to the owners or stockholders of the bank. If you're thinking, ""Wow, I'm paying back a whole lot more than I borrowed"", well, yes. But remember you're borrowing that money for 20 or 30 years. The bank isn't making very much money on the loan each year that you have it -- these days something like 4 or 5% in the U.S., I don't know what the going rates are in other countries."

negative: "If you buy a call, that's because you expect that the stock will go up. If it does not go up, then forget about buying more calls as your initial idea seems to be wrong. And I don't think that buying a put to make up for the loss will work either, the only thing that is sure is that you will pay another premium (on a stock that could stay where it is). Even if you are 100% sure that the stock will go up again, don't do anything, as John Maynard Keynes stated: ""Markets can remain irrational longer than you can remain solvent"". My idea is: wait until the expiration date. The good things about options is that you won't lose more than the premium that you paid for it and that until it reaches its maturity you can still make money if the market turns around. More generally, when you are purely speculating, adding to a position when it goes against you is called ""averaging down"". I sincerely discourage you to do that : If the stocks goes in the wrong direction, that means that your   initial idea was wrong in the first place (or you were not right at   the right moment). In my opinion, adding up to a wrong idea is not the   right thing to do. When you are losing, just take your loss and don't   add up to your position based on your emotions. On the other hand, adding to your position more when the stock goes in   your direction is called ""pyramiding"" and is, in my opinion, a better   way of doing things (you bought, you were right, let's buy more). But   at some point you will have to take your profits. There are plenty of other stocks on which you can try to invest and the market will still be here tomorrow, there will be other opportunities to make profits. Rushing things by constantly trying to have a position is not a good idea. Not doing anything is also a strategy."

negative: "Selling as well as buying a stock are part science and part art form.  I remember once selling a stock at its 52 week high too. That particular stock ""quadrupled"" in value over the next 52 weeks.  Mind you I made 50% ROI on the stock but my point is that none of us have a crystal ball on whether a particular stock will ever stop or start going up or stop or start going down. If someone had those answers they wouldn't be telling you they would be practicing them to make more money! Make up your mind what you want to make and stick by your decisions.  Bulls make money when stocks go up and Bears make money when they go down but pigs don't make money. -RobF"

negative: The time when you might want to do this is if you think BBY is undervalued already.  If you'd be happy buying the stock now, you'd be happy buying it lower (at the strike price of the put option you sold).  If the stock doesn't go down, you win.  If it does, you still win, because you get the stock at the strike price. If I recall correctly Warren Buffett did this with Coca-Cola.  But that's Warren Buffett.

negative: "I understand you make money by buying low and selling high. You can also make money by buying high and selling higher, short selling high and buying back low, short selling low and buying back even lower. An important technique followed by many technical traders and investors is to alway trade with the trend - so if the shares are trending up you go long (buy to open and sell to close); if the shares are trending down you go short (sell to open and buy to close). ""But even if the stock price goes up, why are we guaranteed that there is some demand for it?""  There is never any guarantees in investing or trading. The only guarantee in life is death, but that's a different subject. There is always some demand for a share or else the share price would be zero or it would never sell, i.e zero liquidity. There are many reasons why there could be demand for a rising share price - fundamental analysis could indicated that the shares are valued much higher than the current price; technical analysis could indicate that the trend will continue; greed could get the better of peoples' emotion where they think all my freinds are making money from this stock so I should buy it too (just to name a few). ""After all, it's more expensive now."" What determines if a stock is expensive? As Joe mentioned, was Apple expensive at $100? People who bought it at $50 might think so, but people who bought at $600+ would think $100 is very cheap. On the other hand a penny stock may be expensive at $0.20. ""It would make sense if we can sell the stock back into the company for our share of the earnings, but why would other investors want it when the price has gone up?"" You don't sell your stocks back to the company for a share of the earnings (unless the company has a share-buy-back arrangement in place), you get a share of the earnings by getting the dividends the company distributes to shareholders. Other investor would want to buy the stock when the price has gone up because they think it will go up further and they can make some money out of it. Some of the reasons for this are explained above."

negative: This depends on the particular index, of course. Capital gains taxes occur when stock is sold (for a profit). This occurs less frequently in an index fund: Where an active manager frequently buys and sells stocks (after all, he wants to be active :-) ), the index fund only sells stocks when the particular stock leaves the index. For an index such as the S&P 500 this does not happen that often.  The more specific the criteria of the index fund, the more often the selling of stock and thus the need to pay capital gains taxes occurs.

negative: "The implication is market irrationality is stronger than market rationality. Aka nothing makes sense when TSLA climbs to $400 or when CMG rises to $750.   I wouldn't say there is a systematic flaw in valuation. I think there is just a lot of ignorance. Markets are more open to household investors than ever before. You used to go to your broker and ask him what's up and he'd give you the inside scoop since you pay them money. Now you go onto marketwatch and get some random nobody's opinion on everything and make stock selections based on that.   But eventually the chickens come home to roost and things will correct itself. Big players will jump ship and cause signals to other traders to jump ship. The public can pump stocks up pretty high but it doesn't just go to infinity. Eventually someone will stop and say, ""wtf is going on"" and start selling. Stocks are sold on a basis of a limit order book so it's real prices that people are paying. People don't care about prices currently because most don't have any finance knowledge but want to invest their own money.  They just hear about Tesla doing something amazing (from some clickbait article or news outlet) and can't stop thinking about buying Tesla. They go to Chipotle and think ""wow this place is so good and hip, they must be a great investment"".   The markets have been filled with more subjective analysis than ever before especially with so much low quality information at your fingertips. Equally ignorant people startin blogs about investment and personal finance being shepherds for other ignorant people. In the end they all lose.  People who exclaim ""this stock is going up to $250 easily"" with literally zero quantitative analysis or even a baseline reference point to back it up are prime examples of this.   Ignorance of markets and cheap money almost always lead to market runs that end catastrophically. Dot com bubble, 1929 market crash, 2008, it's always the same. People who have no business taking loans out or buying on margin or leveraging positions with debt only to get fucked over once things are brought back down to Earth. After 2 runs of QE, we now have cheap money and with everyone being a crier for their personal investment strategy, we now also have rampant ignorance.   I don't expect things to last but no one can call the bottom or the top, or else you'd be very very rich. Have a safe portfolio, don't try to time the markets. Have a strategy that hedges against unexpected change, don't try to gamble on this change. Because it's ultimately impossible to predict the movement of every single person on this earth that invests their money into markets. So don't try. Just be prepared.   ----  To expand further into valuation theory:  at the end of the day, people invest their money to make more money.  It's as simple as that.  If your money doesn't grow in an investment vehicle, it's ultimately a shit investment.  But no one values intrinsic value of a company's equity before they decide whether or not $380 for TSLA is a good/bad deal.  As a result, stocks can be pumped up way higher and people still see the gains on their stocks through capital gains fueled by other optimistic investors.   Non-zero sum goes both ways.  People can make shitloads of money on stock without an equitable loser--people can also lose shitloads on stock without any real winner emerging from the rubble.  When this bubble bursts, lots and lots of people will lose money on TSLA when people's expectations become rational and they stop paying $300 a share for a negative or 70 PE ratio.  It's insane what multipliers people will pay for these companies without even realizing the implication--if you buy a share of a company with a PE ratio of 70, you just paid 70 times their earnings for a share.  In an ideal world where they released every single penny of earnings as dividends, it would take you 70 periods to reclaim your money on that share.  This obviously doesn't take into account capital gains, but capital gains aren't supposed to be this irrational to where a stock can be pumped up into 70x PE ratio in the first place.  It's a whole messed up web of confusion and irrationality and eventually something will catalyze a reaction.  Imagine a market where everyone just agreed to pump up a single stock to infinity and everyone just rakes in shitloads of money.  Would this work?  Of course not.  It's literally a pyramid scheme that relies on future generations to constantly inject capital--no real value is being created by this scheme.  It requires constantly more future generations to continue adding money into the scheme and will crash once people stop pumping money into it.  The same thing will happen here.  Everyone ""agreed"" to pump up TSLA (in a sense) but eventually people will realize this is stupid as shit and the pyramid will come tumbling down because there is nothing they receive from this scheme other than the money from other people.  It's essentially moving money around, making 0 use of it, until people stop pumping money into the system and everyone realizes that nothing of real value had been produced through the use of this money.  Ultimately the only thing that creates real value is the money that is returned to shareholders from an outside party--the company you're invested in.  Real value is not created when people exchange stock and money.  So why do these transactions create higher values in equity?  The basis of equity valuation states that dividends are the only way for companies to raise the price of their stock, going off the traditional Dividend Discount Model.  And theoretically, that's the only logical explanation.  Buying and trading stock does nothing for the company, minus T Stock they might own.  Ultimately the only party creating real value is the underlying company.  If they aren't creating real value, then their stock should not be increasing, period.  The way they create value is by efficiently utilizing assets to generate returns on investment which can be returned to investors through dividends.  Dividends can only be increased (while maintaining an equitable payout ratio) by generating more net income that can increase the actual pool of money that can be allocated back to investors.  TSLA does not do this.  TSLA regularly loses money and overpromises.  There is no logical explanation for any of this except that everyone is irrational.    Obviously theory is not the same as in practice but the theory is important here because it's really the basis for any investment at all.  At the end of the day, a share of stock is the right to a share of the company's equity.  People own equity in companies because companies generate money that it returns back to its owners.  That's what a company does.  That's what an owner does.  If you own shares of a company, you're an owner.  And if your company does not return more money back to you YoY, then why are you invested in them?    Ultimately, you're riding a capital gains wave that will eventually subside once market irrationality succumbs to rationality.  And it always does because the real value always catches up to the fake value that is caused by pumping and dumping stocks."

negative: "If the price used to be 2.50 but by the time you get in an order it's 2.80, you're going to have to pay 2.80. You can't say, ""I want to buy it at the price from an hour ago"". If you could, everybody would wait for the price to go up, then buy at the old price and have an instant guaranteed profit. Well, except that when you tried to sell, I suppose the buyer could say, ""I want to pay the lower price from last July"". So no, you always buy or sell at the current price. If you submit an order after the markets close, your broker should buy the stock for you as soon as possible the next morning. There's no strict queue. There are thousands of brokers out there, they don't take turns. So if your broker has 1000 orders and you are number 1000 on his list, while some other broker has 2 orders and number 1 is someone else wanting to buy the same stock, then even if you got your order in first, the other guy will probably get the first buy. LIFO and FIFO refer to any sort of list or queue, but don't really make sense here. When the market opens a broker has a list of orders he received overnight, which he might think of as a queue. He presumably works his way down the list. But whether he follows a strict and simple first-in-first-out, or does biggest orders first, or does buys for stocks he expects to go up today and sells for stocks he expects to go down today first, or what, I don't know. Does anybody on this forum know, are there rules that say brokers have to go through the overnight orders FIFO, or what is the common practice?"

negative: PEG is Price/Earnings to Growth.  It is calculated as Price/Earnings/Annual EPS Growth.  It represents how good a stock is to buy, factoring in growth of earnings, which P/E does not.  Obviously when PEG is lower, a stock is more undervalued, which means that it is a better buy, and more likely to go up. Additional References:

negative: Value investing is just an investment strategy, it's an alternative to technical investing. Buffet made money picking stocks.  It's not obvious how that adds value, but it does. Everything about the stock market is ultimately about IPOs. Without active trading, of stocks after issue, no one would buy at the IPO.  The purpose of an IPO is to finance the long-term growth of a business, which is the point in the process where the value to the people gets created.  There is a group of elites that needs to be dealt with, you're correct, but I worry that your definition of this group is overly broad.

negative: Let's say I have $10,000, and I invest said monies in mutual fund   XXXXX at $100/share, effectively giving me 100 shares. Now, let's   assume at the end of the year I have a 5% return. My $10,000 is now   $10,500. At what point does my investment benefit from compounded interest?   Monthly? Quarter? Yearly? Does it even benefit? Daily would be my answer as your investment, unless you are selling shares or not re-investing distributions is getting the following day's change that impacts the overall return. Consider how if your fund went up 2% one day and then 2% another day from that $10,000 initial investment. The first gain brings it up to $10,200 and then the second makes it $10,402 where the extra $2 is from the compounding. The key though is that these are generally small movements that have to be multiplied together. Note also that if your fund goes up and down, you may end up down overall given how the returns compound. Consider that your $10,000 goes up 10% to $11,000 and then down 10% to result in $9,900 as the return for up x% and down x% is (1+x)(1-x)=1-x^2 which in this case is 1% as 10% of 10% is 1%. The key is how long do you keep all the money in there so that the next day is applied to that amount rather than resetting back to the initial investment.

negative: "Why do people keep talking about 401K's at work?  That is NOT dollar cost averaging.  DCA refers to when you have a large sum of money.  Do you invest it all at once or spread it out over several smaller purchases over a period of time?  There really isn't a ""when"" should I use it.  It is simply a matter of where your preferences lie on the risk/reward scpectrum.  DCA has lower risk and lower reward than lump sum investing.  In my opinion, I don't like it.  DCA only works better than lump sum investing if the price drops.  But if you think the price is going to drop, why are you buying the stock in the first place? Example: Your uncle wins the lottery and gives you $50,000.  Do you buy $50,000 worth of Apple now, or do you buy $10,000 now and $10,000 a quarter for the next four quarters? If the stock goes up, you will make more with lump-sum(LS) than you will with DCA. If the stock goes down, you will lose more with LS than you will with DCA. If the stock goes up then down, you will lose more with DCA than you will with LS. If the stock goes down then up, you will make more with DCA than you will with LS. So it's a tradeoff.  But, like I said, the whole point of you buying the stock is that you think it's going to go up! So why pick the strategy that performs worse in that scenario?"

negative: I would be nice to live in a world where people voted with their wallets and held businesses managers accountable for their actions. We don't currently live in that world so as long as WF makes money and pays dividends investors are still going to buy their stock.

negative: "Well, they don't ""make"" money in the sense of income, but they receive money in exchange for shares of stock (more of the company is owned by the public).  The Warrant entitles the holder to purchase stock directly from the company at a fixed price.  It is very much like an open-market call option, but instead of the option holder buying stock from a third party (which does not affect the company at all), the holder buys it directly from the company, increasing the number of shares outstanding, and the proceeds go directly to the company. If the holders do not exercise the warrants, the company does not receive any cash, but they also don't issue any new shares."

negative: "You have several options depending on your tolerance for risk. Certainly open an investment account with your bank or through any of the popular discount brokerage services. Then take however much money you're willing to invest and start earning some returns! You can split up the money into various investments, too. A typical default strategy is to take any money you won't need for the long term and put it in an Index Fund like the S&P 500 (or a European equivalent). Yes, it could go down, especially in the short term, but you can sell shares at any time so you're only 2-3 days away at any time from liquidity. Historically this money will generate a positive return in the long run. For smaller time frames, a short-term bond fund often gives a slightly better return than a money market account and some people (like me!) use short-term bond funds as if it were a money market account. There is a very low but real risk of having the fund lose value. So you could take a certain percentage of your money and keep it ""close"" in a bond fund. Likewise, you can sell shares at any time, win or lose and have the cash available within a couple days."

negative: "With (1), it's rather confusing as to where ""interest"" refers to what you're paying and where it refers to what you're being paid, and it's confusing what you expect the numbers to work out to be. If you have to pay normal interest on top of sharing the interest you receive, then you're losing money. If the lending bank is receiving less interest than the going market rate, then they're losing money. If the bank you've deposited the money with is paying more than the going market rate, they're losing money. I don't see how you imagine a scenario where someone isn't losing money. For (2) and (3), you're buying stocks on margin, which certainly is something that happens, but you'll have to get an account that is specifically for margin trading. It's a specific type of credit with specific rules, and you if you want to engage in this sort of trading, you should go through established channels rather than trying to convert a regular loan into margin trading. If you get a personal loan that isn't specifically for margin trading, and buy stocks with the money, and the stocks tank, you can be in serious trouble. (If you do it through margin trading, it's still very risky, but not nearly as risky as trying to game the system. In some cases, doing this makes you not only civilly but criminally liable.) The lending bank absolutely can lose if your stocks tank, since then there will be nothing backing up the loan."

negative: @MichaelBorgwardt gave an excellent answer. Let me add a little analogy here that might help. Suppose you bought a car from Joe's Auto Sales. You pay your money, do all the paperwork, and drive your car home. The next day Joe's goes bankrupt. What affect does that have on your ownership rights to your car? The answer is, Absolutely none. Same thing with stocks and a stock exchange. A stock exchange is basically just a store where you can buy stock. Once you buy it, it's yours. That said, there could potentially be a problem with record keeping. If you bought a car from Joe's Auto Sales, and Joe went out of business before sending the registration paperwork to the state, you might find that the state has no record that you legally own the car and you could have difficulty proving it. Likewise if a stock exchange went out of business without getting all their records properly updated, their might be an issue. Actually I think the bigger concern here for most folks would be their broker and not the stock exchange, as your broker is the one who keeps the records of what stocks you own long term. In practice, though, most companies are responsible enough to clean up their paperwork properly when they go out of business, and if they don't, a successor company or government regulators or someone will try to clean it all up.

negative: What does it mean when some one says that today there was a lot of net selling or buying in a stock. What does it mean because for every selling there is also a buying going on then how can you determine a selling or buying ? Generally if the price of stock has gone down compared to previous day, the trend is of selling. As the price can be volatile, there maybe few trades that are above close price of previous day, or below close price of previous day.  How can you calculate average trade price for a stock It is simple {sum of all [price*quantity]}/quantity. Related question Equity market inflow meaning

negative: I agree with all your points- I'm currently job hunting in cheaper areas so I don't have to financially tread water.   I meant that I see a lot of people with nice cars, going out to eat all the time, buying places. I have friends in their 20s buying their first apartment, but I know that they don't make nearly enough money for that from their jobs. Where does the money come from? Am I wrong to assume that their parents pay for everything?

negative: Don't sit on it, because the money does not work for you. Add more money to it and buy a stock or stocks of the company.