Correct me if I’m wrong!
I understand that a stock is an investment into a company, so you own a small part of the company and can get a part of the profits (dividends) and sometimes make decisions for the company.
The price of a stock is determined purely by supply and demand, the displayed price is actually the price at which the latest stock was sold. So it depends entirely on how much people are willing to buy/sell the stock for.
This is where I get confused. What gives a stock its value? Isn’t it purely an instrument to buy and sell (for profit) then? What distinguishes a X stock from a Y stock for example? Why do people want to sell the stock (for less) when the company is doing badly, if the price is not determined by said company? For example if X was doing insanely bad, but people still wanted to buy the stock thus making the price rise even more, why would that be ‘wrong’?
Thanks in advance!
In: Economics
The (perceived) value of the company (aka Market Cap) divided by the number of outstanding shares = share price
It all starts/stems from the perceived value of the company.
(What are its assets vs. debts. vs revenue? Etc)
Further complicated by the bid/ask nature of the market. No one wants to pay too much, and no one wants to sell for too little.
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