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peter | Does your success at the stock market depend on how well the business you invest in does? |
I heard one person explain that the WORSE your company does the more money you make. Is this true? Or is it the other way around? |
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frozen555
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It depends what decisions you make.
If you buy the stock, then obviously you'll make money if the company does well.
If you sell short, then you'll make money while the company falls apart.
Yes, this is possible. You can make money both ways. You just have to know which way the stock is going to go.
First, you have to decide whether the company will be successful or failure. If you think it will be a success, then buy it. If you think it will be a failure, then sell short or buy put options. Selling short and trading options is riskier than just buying the stock, but if you understand what you're doing, the rewards can be quicker and greater.
Someone asked earlier, "What is short selling and how does it work?" You may want to read my answer:
http://answers.yahoo.com/question/index;_ylt=AroWo6ghbWp8e7uW9vclL6bty6IX?qid=20070411125335AAF8PlH&show=7#profile-info-AA11532918
Some people buy the stock and buy "insurance." The insurance is a put option. The put option is like a bet or a lottery ticket. It can become extremely valuable if the stock goes down, but it expires worthless if the stock goes up. So, if your stock goes up, you paid for the insurance, and you didn't need it. But if your stock goes down and you lose money, then your ticket is a winner, and you win a lot of money. If you did everything right, then the amount of money you win is more than the amount you lost in the stock. So, it doesn't matter which way the stock goes. If it goes up, you make money. If it goes down, you make money.
Now, if you don't buy the stock, but you buy the put option, then what happens? If the stock goes up, the option is worthless. If the stock goes down within a certain time, then you can sell the put option and make a lot of money. You make money only if the stock goes down. If the stock goes up, you lose the amount of money you paid for the insurance. So, the worse the company does, the more money you make.
Note: Buying put options (insurance) and selling short are two totally different things. |
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bull_rooster_aardvark
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In general, the better your company does the more you make - the person was confused. There are "strategies" that invest in stocks that have performed badly hoping for a turn around, and all sorts of other things but typically you are investing in the company after it has gone down already hoping its situation will improve. So, your friend had it reversed.
Possibly your friend was talking about short selling - in essence a strategy where you make money if the stock price goes down. For this it is true that the worse youy company does the more you make. |
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SHORTY22
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and also the people who invest and buy that stock....... |
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Tee Dub
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And how many people buy/sell their stock for that company |
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wacjr79
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In general, if a company does good, then the stock should do good. However, stock price is based on the ratio of people buying/selling the stock (up/down volume). So it's really more of a psychological game. If you think that other investors are going to start buying a stock, then you buy it. If you think investors are going to sell the stock, then you sell it if you have it (or sell short if you don't). |
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A Landers
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Suggest you research "selling short." This may make it more understandable.
Best way to invest is on a regular basis before taxes. Most employers will hold aside a designated amount and place it with a company like Vanguard. They have a lot of funds so it easy to diversify.
By investing with each pay check, when the market is down, you get more for your money. When it is up, you are making money on the stocks you purchased when the market was down. This is a technique called ":Dollar cost averaging."
Good luck |
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billet7
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Really it is the perception of how well a company is likely to do, or is doing that would usually raise the price of their stock.
Frequently companies that have done poorly in the past will be a good buy because the stocks are undervalued.
I don't believe that a company that does worse makes you more money. If this does happen by some fluke, eventually, the price will come down and you will loose in the long run. |
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yyyyyy
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there are lots of different stock market "strategies' that people follow
in general if your compay does well its stock price may rise, but it isn't that simple. For example a company that is hot might be projecting (that means guessing) future earnings of, say, 25% growth in the next year, but then at the end of the year if the comapny's growth was 23% it might be negative for the stock market because eventhough they did great they didn't do as great as they said they would so . . . something might be wrong!
Stock purchases are pretty much a guessing game done by extremely smart guys (and gals) who guess as best they can.
Your friend might be invested (at least partly) in some hedge fund which is like a bet that the company won't hit its projections. So if the company does worse he does better. It is a complicated strategy buying and selling "futures" which are like tickets to buy a stock at a certain price at a certain time in the future.
A decent strategy to make some money in the market is to buy good companies that have been around for a long time and just hold on to them for the long haul, instead of trying to buy and sell and outsmart the market. |
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alexatx44
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its all about buying and selling really what ur doing is gambling.
u buy a stock market that is low because its doing poorly so its cheap, then u hope it does better then u can sell it for a higher prize. look if its doing (bad its cheap) doing (good is expensive) |
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