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
Lots of comments about the gains from the value of the stock going up and then selling it. But people aren’t just buying stock because they think other people will value it at a higher price later. There’s also actual earnings to be had that do not coming from selling the stock to another person.
Companies earn profit, and if they don’t need that money for reinvestment (such as to expand the business), they will pass that excess profit on to the stockholders by paying dividends or doing stock buybacks. So that’s money earned without taking it from another trader.
That’s mainly what dictates the price people are willing to pay for a stock. They are looking at the ability of the company to pay out more profits in the future, so that’s why a growing company that expects higher profits in the future will go up in stock price.
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