|
corysub -> RE: How the Market Works (10/7/2008 10:50:37 AM)
|
Owning a share of stock makes you a "partner" in the corporation. Like any business partner, you hope the business does well and show good earnings growth, has a unique or a strong competitive advantage in the business and, particularly these days, a company that has a strong management team and solid balance sheet.
If all these things come together, your hope is that some other guy/gal might also want to be an owner of the shares. Since there is a set number of shares out in the public hands, the only way to own them would be to buy them from a current shareholder, like you, or sometimes should the company decide there is a business need to sell more shares in a secondary offering via a prospectus available at any participating broker.
The stock goes up and down in value depending a many factors...most importantly being the earnings performance of the company, growth in market share, continued innovation in product offerings (the problem with US auto companies that did not keep up with Japanese innovation and excellent back-up service), as well as the industry the company is working...steel, auto, rails, technolocy, finance, etc. Obviously, you could have shares in one of the better quality banks these days and still see you stock go down in value if the buyers are just not interested in that group for a variety of reasons.
Anyway..this is getting kinda long winded,, and I am sorry for that...but there really is no one line answer to your question other than the cliche "more buyers than sellers, a stock goes up, and vice versa" If you have any specific question please IM me and I would be happy to chat with you.
cory
|
|
|
|
