When I am buy stock at a lower price point than it was trading a 1 day or week, month or year later, does it mean that somebody during that same time frame is losing the difference?
In: Economics
People can lose money on stocks but people don’t have to it can be mutually beneficial.
You buy a house and decide to rent it out to make money. While you own it you receive rent (dividends) and also hope that the value of the house goes up, because you can charge more rent or the land is worth more. When you sell the house both sides “win”, you get what your house is worth in cash that you can then do other things with and the buyer gets the house to use.
Possibly if you needed a smaller amount of cash you might let your mate buy half the house. Say 50/50 or you and your mate both have 50 shares each. You get half the value of the house now and split the rent earned going forward.
Stocks are the same except instead of house it’s company and instead of rent say dividend. Instead of owning the whole thing you own a tiny percentage of it.
Stocks can involve people losing money, eg if the company is not doing well (or if we like the house analogy maybe the house needs repairs) but a company that is going well can be a be a win for everyone in the transaction.
Other types of financial instruments such as options do have a much more defined financial win/loss occurring when looked at purely from a monetary point of view. But even these can be mutually beneficial when looked at as risk reduction and hedging tools.
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