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
Good question and I will expand on this. To answer your question directly no, unless I buy a share yesterday and sell it today no one lost money in that transaction. When there is a transaction there is always a buyer and a seller, if a stock is trading at $100 yesterday and $95 today that just means that someone who bought yesterday has what we call a $5 “unrealized loss”, if they were to sell it they would lose $5 and their brokerage will show they lost $5. If they wanted to buy the 1 share today they could have saved $5 of cash, which is losing the potential to make more money, but regardless the person still has 1 share of company stock. For example, say you bought any product from a store, you go there the next day and the same product is 5% off, you didn’t lose money, you just missed the opportunity to buy it cheaper.
To answer the question in your title: in order for someone to make money in the stock market does someone else needs to lose money: the simple answer is yes, the complicated answer is yes but that’s ok. Take for example a company goes public and issues shares of stock at $10 each, person A buys the offer for $10, sells it to person B for $20, who sells it to person C for $30 who plans on holding the shares forever. Many years pass and the share is now worth $60/share. We know A made $10, B made $10, and C has an unrealized gain of $30, so who lost money that C has this gain and A and B have cash in their pocket? The answer is the company, they received $10 for the share and now if they want to sell the company, pay a dividend, or do a share buyback they need to buy C out at $60. I can promise you that the company does not care, because if the company’s value increased by 6x that means that they made good investments with that $10 whether its new machinery, a new plant, or something else.
>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?
Your question is awkward, but I think you are asking this:
“If John buys a stock at price ‘X’ from Adam, and the stock rises to price ‘X + Y’ in 1 year, did Adam lose ‘Y’ dollars?”
That answer is emphatically “no.”
If I have an old table I no longer want and sell it to a neighbor for $10 and that neighbor sells the table online to someone for $100, have I lost money? No, but it does feel bad to learn that I probably could have received more money from the table.
One might even argue that such behavior is unethical in some way, but I didn’t *lose money.*
No. When you buy a stock you’re betting that the value of that company increases over time. That company can do that without anyone losing money.
Every buy is someone else’s sale but that does t mean every sale is a loss.. example, I buy a stock for $50 and sell it for $70. I made $20. Guy who bought it for $70 sells it for $90. We both made $20, both came out winners.
No.
You have a pile of wood. You can sell that wood for $150.
You put in effort, and $50 in other supplies, and use that wood to make a nice table. You can now sell that table for $300.
You have increased the value of your assets, but nobody has lost money. I guess you could argue that to buy yours, some other table likely went unsold, costing that person money. But that’s a really indirect connection, and not always guaranteed.
No. Buying and selling stocks is not like buying and selling crypto or beanie babies. Stocks themselves provide value. Some provide a portion of the company’s revenue back to stockholders in the form of dividends. Others focus on growth, either on the assumption they will be bought for a large amount later in time or will provide dividends later.
Of course it depends on how you invest. Some people try to time their buying and selling to correspond with highs and lows. They are assuming they know more about the market than the average investor. Which if you are a professional analyst, maybe they do. If they are a kid in their parent’s basement with a Robinhood account, they probably don’t.
But even then, since most companies do indeed grow over time, they still can profit in end.
Not necessarily… they may have bought a long time ago. You buy stock at $200 that was trading at $220 a few weeks ago, but there were investors who bought at $10 or $20 or $100 or $150, etc. do even if their holdings of that stock were sold at less than its peak value, they still made money.
Nope, for lots of reasons. There’s one reason why that hasn’t been mentioned. Companies can issue new stock.
Let’s say 5 people each own 100 shares each, and those 500 shares constitute 100% of the shares of the company. The 5 shareholders then pay a bank to come in and say how much those shares are worth. The bank says $1. So the company is worth $500 and each owner has a $100 chunk.
Then those 5 people all agree that the company will generate — and then sell — 100 more shares to whomever else wants them. They decide to use a popular public market to sell those shares so they can get a good price. They “go public.”
Those shares are popular because lots of people think the company is worth more than $500. The new sharesbstart selling for a bit more thwn $1, then, as more are sold, $1.50. By the time the 100th new share is sold, the price is $2. At the end of the “offering” of these 100 shares, each original owner has a chunk worth $200, and most of the people who bought those 100 new shares also benefited from the rising prices (the people who bought for less than $2). Virtually everyone wins, as long as they don’t all turn around and try selling these suddenly-more-valuable shares at the same time.
It’s way more complicated than that, eg a bank needs to act as the seller of those 100 shares, there’s a lot of money spent and due diligence researched and drama that happens, but basically it’s not uncommon for everyone to win, and for a long ass time, too.
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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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