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Threads like this reek of stupidity quickly indeed.
If I bought XYZ stock for $10 a share and sell for $15. The person who paid $15 for my stock sold it for $20 a year later. The person who paid $20 for this stock will lose money if this stock declines in value. Nothing goes up forever. At some point down the line some fool will lose money.
How stupid does one have to be not to see something as simple as this?
Not necessarily. You only lose money in a declining market if you sell your stocks. You already traded your money for assets when you bought the stock, so you don't have any money to lose.
It astonishes me that people don't understand the difference between money and assets. Money and assets are related, but are not the same thing. You can trade money for assets or assets for money. The metrics they publish for investors do a lot to mislead people about what they are trading. Inflation numbers, for instance, convince people that the value of money constantly declines. However, if the stock market drops 50%, your money is now worth twice as much, assuming you want to buy stocks and not beans. The market index is a measure of asset inflation indexed against the value of the dollar.
You can look at it as the value of stocks dropping 50%, or as the value of the dollar increasing 50%. It's why investors move to cash during periods of instability. I own one fund that clearly states in its prospectus that, without notice, it can move 90% of the total fund value to cash as a defensive position.
when using money to buy stocks when they decline your money is actually functioning as a stock option to buy stocks at lower prices but without the expiration date .
your relationship is really not correct . think of the great depression . stocks actually were not down as much because there was deflation in the economy . with the cpi down 18% it only took stocks 4-1/2 years to recover dollar wise . so trying to compare inflation to stock losses is not apples to apples
Not necessarily. You only lose money in a declining market if you sell your stocks. You already traded your money for assets when you bought the stock, so you don't have any money to lose.
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Oh man, I had high hope that you are not like some of the wannabes here until you posted this.
Years ago when I was a newbie in the world of stock trading, I made my shares of mistakes including holding on to losing stocks and telling myself that I haven't lost anything because I haven't sold. I held on to these stocks for months and even years. Unfortunately, most of them never recovered.
Let's look at some simple number, shall we? Say I bought a stock for $20 and it sank to $10. The young stupid me would ignore market facts and continue to live in hope and dream and tell myself that I can buy more at a discount. It never dawned on me that for this now $10 stock to go back to $20 it would have to make a 100% gain. Most don't and some that do go back up would take a long time to get there-- sometimes years. Because of this newbie ignorance, I would end up losing money in the end. There is also an opportunity cost because my money is tied up in these losing stocks for a long time instead of being put to better use elsewhere.
stock trading is speculating not investing . i am still waiting for you to show as anyone who lost a penny in diversified funds over any typical accumulation period which generally spans 20-30 years . i bet you can't find any group that would have lost money with a 50/50 over an accumulation period .
Last edited by mathjak107; 03-16-2017 at 04:28 PM..
Seems like we have been in a secular bull market forever.. stock market has hit astronomical highs, unemployment is low, credit is super cheap, home prices have skyrocketed to the stars and people now have home equity that they are either eyeing or have already leveraged, people are having a good ole time.
How long will this party last?
I don't think it'll last long. Just take a look at the various macroeconomic indicators, it looks pretty bad.
Household debt has reached it's highest levels.
Average middle class income is not going up as fast as inflation.
Stock market is as high as ever.
Income inequality has now reached pre Great Depression levels.
well check the leading indicators - they look very good , along with unemployment , an up tick in wages , low inflation and corporate profits recovering from the 2014 fall .
well check the leading indicators - they look very good , along with unemployment , an up tick in wages , low inflation and corporate profits recovering from the 2014 fall .
I'd argue corporate profits are only going up due to easy credit. Many jobs created are low wage service sector jobs which only encourages more people to borrow more to maintain their standard of living.
Consumers can get access to easy credit and borrow to buy goods, however, these profits are essentially borrowed time. As noted, consumer debt levels has reached it's highest it's ever been.
I'd argue corporate profits are only going up due to easy credit. Many jobs created are low wage service sector jobs which only encourages more people to borrow more to maintain their standard of living.
Consumers can get access to easy credit and borrow to buy goods, however, these profits are essentially borrowed time. As noted, consumer debt levels has reached it's highest it's ever been.
i live off my portfolio being retired . this is my livelihood to some extent . how it goes is what matters to me as much as anyone's job matters to them .
if it's good ,it's good . .
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