As I understand it, when people buy a share of stock, the price goes up. When people sell it, the price goes down. So what does this have to do with the company itself that this stock represents? For example, if a bunch of people wanted to make Apple’s stock price go down, they could just agree to sell their shares. So what does the actual stock price have to do with the company?
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> As I understand it, when people buy a share of stock, the price goes up.
There’s the piece you’re missing. Buying a stock doesn’t do jack or crap to the price of the stock.
As far as price is concerned? All buying a stock does is mean that there’s less of it for other people to buy.
Imagine this example, to help you think your way to answering your own question:
Imagine that after a really really really long day at work you want nothing more than your most very favorite candy bar to treat yourself a little bit.
Normally that’s no problem. You go into the store, buy what you want, and enjoy your little slice of heaven while you eat your candy bar.
But what if, for example, someone else figured out that a lot of other people like you want that candy bar at the end of their workday, and decided to buy all of them.
The store can’t sell them, since they’re officially sold out.
But the dude right outside the entrance to the store? He’s got a dozen of the best candy bars ever, and he’s willing to sell them to you for $20 each, cashy-money only please and thank you.
So you fork out your $20. Because dammit. You really want that candy bar.
But next week you’re coming in prepared. You buy all of the store’s candy bars on Monday morning at the normal price, knowing that that the weirdo out front will buy them off you at 150% of the original price. And the weirdo is only buying them at 150% because he knows for sure he can resell them at 200%. So, guaranteed 50% profit off of a few minutes work on Monday morning as far as you’re concerned.
That’s basically the entire idea behind the stock market.
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