I just don’t understand how it works…when I hold shares in a company and I spend money there, am I technically making a very very small amount of that money back?
ALSO:
what is the simplest way to explain how stock prices increase then?
In: Economics
Sort of, but not really. A company’s stock price is based on supply and demand – how many shares are available to be bought vs how many people want to buy them. This means that the share price is much more about peoples’ perception of a company’s value than its actual value. If the actual value grows consistently then that will inspire confidence and more people will want to buy shares in it so the price will go up. The way to grow the company’s value is to sell more stuff, but we’re talking about the scale of an entire company here so nothing an individual buys (unless it’s a lot of their stock all at once) will have any measurable impact on its share price. If people think the company isn’t doing well or there is some bad news about it that gets released confidence will be shaken, more people will want to sell than buy, and its share price will go down. Obviously it’s much more complex than this and there are a lot of factors at play, but this is ELI5 not ELILicensedBroker.
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