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
To answer your second question first: Stock prices are based on supply and demand of shares. The number of shares outstanding normally doesn’t change very much so supply stays pretty constant. If more people are buying than selling the stock price rises, if more people are selling than buying the stock price falls. That is it, it doesn’t matter if a billion people shopped at a company or 0 did.
With that being said, when someone purchases a stock they’re buying a right to the company’s profit. Higher profit will cause more people to want to buy the company stock causing the price to rise. Indirectly if enough people buy something at a company it would cause profit to rise and more people to buy the stock, but the share price rises because people are buying.
Latest Answers