I just got into the stocks market. AFAIK every transaction must have someone selling and someone buying, both thinking that they will be making money. How can both be making money?
Does that mean at least half of everyone in the stocks market will have to be losers?
In: 97
If the total amount of money and valuable things in the world were constant, the economy and the stock market would be a zero sum game with as many winners as losers.
Fortunately we live in a world where new value is created constantly, whenever someone mines a pound of ore or writes a piece of software, and a monetary system where new money can be easily created to represent that new value. We can expect there will be more value and more money in the future.
Stocks represent ownership in companies, and as a company creates new valuable stuff and sells it, it gets more money to share with stockholders as dividends, and the value of its own stuff increases. Both of these make it more attractive to stock buyers.
This way of thinking seems very remote from the cutthroat world of day trading. This happens on a timescale so fast that the long-term change in value of the company is irrelevant, and it really is a zero-sum game with as many winners as losers. The people who tend to win are the ones who know more about the specific events that trigger the long-term shifts in the value of companies I mentioned earlier. As a newbie amateur, you are not those people, so you are more likely to lose than win.
In long-term investing, almost everybody usually wins. In day trading, the pros more often win and the amateurs mostly lose.
Latest Answers