Let’s just say for example, I bought a stock at $10. Then it goes up to $500
I can obviously make a profit, but why would someone buy it at such a high price?
Is it like the person who buys it at $500 is hoping that it will go up to $1000, then the person who buys it at $1000 hopes it will go up to $1500, and so on?
In: Economics
a company’s stocks also grows in value if a company starts to become more profitable, because stocks = company ownership
Why indeed. Why are people buying Bitcoin at 70,000? Because they think it’s going to go up
Everybody who buys and sells stock in the short term is guessing or trying to estimate when to buy and sell. Some are better at it than others, or just sometimes luckier. Lets’ say you buy at $22 and it goes up to $26, and you think ok, I will sell and make a profit. You sell, and it goes to $30. You think damn, I should have held on to it. So you have a another stock you bought at $40 and it’s gone up to $46, and you decide to hang onto it until it gets for $50; however, instead it drops suddenly to $32, and you’re afraid it will drop even lower, so you sell at a loss before that happens. So you made money on one stock, and lost money on another.
At least with crypto, it depends on how many suckers you can pull in when you’re shilling your shitcoin rugpulls on Twitter.
When you see advertisements for investments, the people who buy those are the suckers. Nobody advertises the great buys
Crypto is gambling. Hoping to make a 1000% return on your stock investment is gambling.
The way that rich people, and investment firms, and universities, and your 401(l) retirement plan make money on stocks is simply by investing in a spread of stocks that will reliably grow over time, at a decent rate. Like 5-8% per year. And it *is* completely possible for your whole portfolio to grow at that rate indefinitely, since the economy as a whole is growing. If/when you sell some of it to get actual cash, the person who’s buying can also reasonably believe that what they bought will keep growing in value.
Yes. As an example, I just pulled up a stock chart for Amazon. If you bought Amazon in 2005 you would have paid ~$2.0 a share (adjusted for stock splits), and if you would have sold in Dec 2012 you would have made ~$12 per share, so more than 5x your money. If you bought then and sold in 2017, that would have been about another 5x gain. If you bought in 17 and still held today, you would have tripled your money. So is Amazon at its peak today, or is there room to grow? Truth is no one knows for sure, so it’s a judgment call. Some people want to hop on the rollercoaster, others are happy to take their gain and move on to the next.
Also, there’s plenty of reasons people sell even if they think a stock could still go up. Estate sales that want to liquidate to pay out inheritances, rich people trying to free up some cash for a major purpose, and portfolio managers who want to maintain a certain balance of stocks and bonds in a given portfolio.
If the stock is valued at $500 that’s probably because the company has been very successful and is making more money than it was at $10 and people expect it to keep growing.
Amazon makes much more money now than it did 2 decades ago, that’s why the stock is worth more.
People here forget that stocks pay dividends. If you own stock there are also many other ways to cash out. One is the company buying back it’s stock which is just returning cash back to shareholders (just a fancy dividend). Another is a buyout by a different company.
Remember that a share entitles you to a share of a companies equity (assets minus liabilities).
Crypto is 100% greater fool theory.
It’s straight gambling, with the key difference being that it’s not a negative sum game, it’s a positive sum game. On average different groups of stocks have yielded 7-10% growth vs casinos which take 3-5%. The rest is speculation: someone will buy at 500 thinking it will go to 510… or 550. Someone will sell at 500 thinking it will not grow fast enough or is overvalued or they just need to be more liquid.
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