Why is Google’s stock priced at 129$ and Microsoft at 322$ for example?
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Imagine stock prices are like the prices of toys in a store that can go up and down every day. These prices are decided by how much people want to buy or sell those toys.
Now, for stocks, the price is influenced by a few important things. First, it depends on how well the company is doing. If the company makes lots of money and grows, people might want to buy its stock, so the price goes up. If the company isn’t doing well, the price might go down.
Other things that affect stock prices are what’s happening in the world. If there’s good news, like the economy is strong or a company is making a cool new product, prices can go up. But if there’s bad news, like a problem in the world or a company messing up, prices might drop.
Anticipating these changes is like guessing what might happen next. People look at lots of information about companies and the world to make their best guess. It’s a bit like trying to guess if it will rain tomorrow by looking at clouds today. But remember, nobody can predict the future perfectly, just like we can’t be 100% sure about the weather.
So, to sum up, stock prices change because of how companies are doing and what’s happening in the world. People try to guess these changes by looking at clues, but it’s not always easy to know for sure.
Now, to know how we get the first price, imagine a company is like a special kind of cake that people want to buy a piece of. When a company first starts and wants to share its cake with others, it does so by turning the cake into something called “stocks.” These stocks are like pieces of the cake that people can buy.
Now, deciding the price of these stocks is a bit like a game. The company and some special grown-ups get together and think about how much they believe each piece of cake is worth. They consider things like how big the cake is (how well the company is doing), how many people might want a piece (investors), and what other similar cakes (companies) are being sold for.
Once they agree on a price for each piece of cake (stock), that becomes the initial stock price value. People who really like the company and want to own a piece of the cake can buy these stocks at that price. As time goes on and the company gets better at making cake and more people want a piece, the price of the stocks can go up or down, just like the prices of toys in a store (as mentioned before)
So, when a company starts, it sets a price for its cake pieces (stocks) based on how much it thinks they’re worth based on their own feelings, and people who want to be a part of the company can buy those stocks to join in the fun!
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