Stock Market (does anyone really understand how it works?)
Does anyone here really understand how the stock market works?
Each day I look at my portfolio --- one day it's great and goes up hundreds .... but then sometimes the next day it will go down ---- but thankfully it always increases in the long run.
How is it that it can be so different from day to day?
Does anyone REALLY understand how this works?
happiest girlNo it's not a joke, lopper.
If you can explain how one day I can make $700 -- and then the very next day loose $ 200 --- I would like to know what you know.
Thanks/.
That's a little scary that you could invest a good amount of money without really knowing how it works. Stock prices fluctuate. Every day the market reacts to all types of news.
Bryan 
Old Gent The stock market is like playing the Roulette Wheel at Atlantic City! There is no rhythm or reason to it. Buy Bonds if you are afraid to gamble.
Mr Negative Happiest,
The markets cannot be explained in one easy paragraph but prices are a combination of performance, psychology, future expectations, global news and many many other things. Different instruments have different volatility and will fluctuate day to day hence you making money one day and losing the next.
Your statement " but thankfully it always increases in the long run." made me nervous. Never believe, especially in this day and age, that the market will keep rising. It has been rising for the last years now primarily due to the govt printing non-stop money with near zero interest rates with the market working as the machine that launders this money into the economy. Be diligent and understand what you are invested in and be ready to move that money quickly when needed.
Mark Wow happy you really should sit down with a financial advisor as you seem to be way over your head. But I will give you a 1 paragraph "stock market for dummies"
Companies issue stock thru IPOs once that is over the only way to buy stocks is buy them from shareholders on the open market. People are buying and selling shares throughout the day based on a million factors. If more people want to buy a company stock the price of that stock goes up. Simple supply and demand. If more people want to sell their share than there at buyers the price goes down. That happens every minute of every hour of every day the stock market is open.
Like Marc said there is no way to explain in a simple paragraph what causes there to be more buyers or sellers for a particular stock on a given day. So much goes into it. Sit down with an advisor to make sure you understand how much risk you are taking and why you are holding specific stocks in your portfolio.
Darwin 
JeffersonRepub 
Calico696 If the ups and downs are too much then there may be too much risk. Unless you're day trading, you don't need to check values everyday. Talking with an adviser would definitely be indicated.
I'll add my two cents though about what makes stocks in particular go up and down so much - nothing more than that's what someone else will pay on any given day. Sure, you'd like to think fundamental value of what companies are doing is involved. That might have been true years ago, today it's anyone's guess and the guesses aren't good. Fake stories, false rumors, buddy of a buddy manipulation, or "it's just cool". If everything were so set in stone, everyone would be a winner. Bonds are no better. Yes the interest rate paid is constant, but the fluctuation of the bond's price will kill you.
GC So it IS a mysterious entity. I always wonder why, when something appears in the news which has nothing to do with the economy, suddenly the stock market will have a bad day.
I invested with an advisor, and it is in the lowest risk category. Maybe that's why at the end of each year I come out with a profit. Hope that never changes.
Thanks for all the feedback.
Mark expressed an opinion on why the market continues rising: "It has been rising for the last years now primarily due to the govt printing non-stop money with near zero interest rates with the market working as the machine that launders this money into the economy."
My opinion is that may be more of a political view than an actual explanation for the rise. The rather conservative Forbes has a different opinion:
http://www.forbes.com/sites/investor/2014/07/24/why-are-stocks-still-rising-is-this-a-bubble/
Of course everyone has their own opinion on why the market goes up and down. Feel free to pick one you like.
RAD it's NOT a mysterious entity, it's just not something you can explain to someone in a paragraph.
"Buy Bonds if you are afraid to gamble."
heh heh.....yeah, Enron, Saturn, all good bonds....
"Yes, please speak to a financial advisor ASAP."
yeah, cuz when they lose your money, they cry......
" It has been rising for the last years now primarily due to the govt printing non-stop money with near zero interest rates with the market working as the machine that launders this money into the economy."
well, this is kinda true, kinda not, and not necessarily for the reasons expressed. First, the government injects money into the money supply re: quantitative easing, it does not print bills, it electronically buys assets. This time it's mostly mortgages. FED buy mortgages on a dream, bank gets money from the dream, and the rest supposedly is trickle down. However, too much money = inflation = higher interest rates. And we don't see that because the banks are sitting on the money and not injecting it into the system via loans or CD interest. So there's more going on here than just printing money. Much more complicated, much more scary to determine the future. But with zero interest rates, more money flocks to an overheated market because that's where the money is and it ain't in fixed assets like CDs from the banks.
But the best is old gents: "There are winners and looser" which sums it up using the Highlander theory of the markets. There can be many winners, Highlander, but in the end there can be only one............looser.
Fact is as was said above, very complicated, operates on facts, emotion, and hysteria. But what is most important is that it's a rigged game. How can there be pre-market sales if you can't make them? Rigged. How come there are machines in the middle leveraging every sale you make for a penny or two? Rigged. And there are other games allowed to the big guys that you and I can't play.
So we can't beat them, but we can get some table scraps if we do what mark says: our homework, be diligent, have a plan on when to take action, and be prepared. And then........prey for some luck!!!! Luck is best. Plain dump luck. Remember, picking stocks on a dart board can get you close to all the work in the world.
I bought bullet stock based on lines at Cabalas and made a killing. Bought UnderArmor this year, made 40% in a few months based on a kid saying he liked the stuff. But have lost similarly after doing much research and being right about everything except a surprise.
And if you get an advisor, remember, they don't lose if you do. No one takes anything away from them and they can always get another job. Be diligent there too, have a plan.
A couple of quick ez rules I use, but that's just me. If I have a stock that's a winner, I set a lower limit at 5% profit when the stock reaches 10%. If it falls, I am guaranteed 5% (or pretty close too unless a real waterfall). If it rises to 15%, I move the lower limit to 10%. Let's me do other things versus watching the winners every day.
Second, there are Total Market and Market funds if you want to buy a bundle but not a stock. For Market, I use real estate REITs to buy into the real estate market without buying any. Last year they tanked, this year I am up 19% (until this week's tumble) and I don't have to manage any real estate. For Total Market you can use funds like VTI, Vanguard's Total Market ETF. Market goes up, you win. Market goes down, you lose. A fun way to put the "over time, the market has risen" to profitable use without picking a stock.
have fun, but do some reading.
mistergoogle I have held on to one stock since 1967. It used to be called Standard Oil and now the company is called Exxon/Mobil. I used the dividend checks, when I was younger for spending money. I wish I had the forsight in 1968 to have just reinvested the dividend money into buying more stock. Glad my husband helped me start reinvesting the dividends. It is nice to watch the portfolio grow.
mansfield mama happiest girl - The lowest risk of stocks is fairly risky compared to other types of investments. I was suggesting a portfolio with little or no stocks at all in which the stock market moves wouldn't give you such swings in value.
Mansfield mama -- that's interesting because I have Con Edison stock that also pays quarterly dividends.. Now I am wondering if I should reinvest those dividends.
Do you know how to figure out which way is more profitable?
Mr Negative -- I have no idea! But now I am interested to find out. It was done thru TIAA.
Happiest girl, I wish I knew the answer too. I think it would be a great idea to reinvest your dividends and then you willhave more stock and not spend any of your money doing it. If you have 30 or 40+ plus years to invest, you would have a nice retirement package there. I went from 90 to 1,300 shares without ever spending any money. Maybe in a few years we could request the dividend checks again and get $900+ 4 times a year. Con Ed is a good stock. Good luck.
I know when it seems it should be up it's down when it seems it should be down it's up , figure that out
cowgirl1 Your portfolio should have safe stocks that are not going out of business anytime soon. Big caps that are real and stable companies. These companies also pay dividends. Dividends should be reinvested. You buy more stock.
Next you sould do research and try to find the next big thing. One evening I was just looking around and I found Human Genome. It was $3 a share. Wish I found it when it was 35 cents a share. I bought a number of shares. I took a shot. Well, the first couple of days it went down a few cents. My thoughts were, well its another loser. Hold on to it and see what happens. Well, I got home from work one day and it was up $5 a share. I was like wow! The next day it was up another $7 a share. It continued to rise until it went to $35 a share. Then it started to decline. When it hit $30 a share I said to myself I still made a nice amout of money so sell. The right choice. It went down into the 20's and it was bought by another company.
The same happened with Herbalife. Bought it at $39 and it went up to I think $106 or so. Some bad press and I sold it at like $100 or $90. I forget. But it still worked out.
Human Genome and Herbalife do not have dividends. I took a shot. It worked. My thoughts for you all is buy stocks that pay dividends and that are safe. Meaning United Technologies or Honeywell and the like. J&J. These folks are going nowhere. And pay dividends.
A fun stock that is no longer in business do to Obama. Yes, its the truth. Obama killed this stock and put the employees on the street. The company was Patriot Coal. It was a wonderful stock to own because it gave you education. It would go as low as $7 and go up to $21 or $22. It was a stock you would buy if you were new to this and gain an education. Obama's war on coal put this company out of business. Too bad. I used to tell people to but a fews shares to get an education on the market. Remember, the USA burns coal cleaner that anyone else in the world. This coal is now in the hands of countries who ruin the atmosphere. Enough said on that.
Another thing to do is buy a stock that you use the product. I love XM Radio. Xm was a$16 stock before it merged with Sirius who was a low level stock. They merged and the stock was around 30 cents a share. I bought it at that price for two reasons. The low price and because I love the service. I've had XM Radio for over 10 years and I never stop loving it. The stock is now well over $3 a share. I bought it because I love the service and never thought I would make a dime on it and I did make many dimes. Its like when I used to pay attention to NASCAR. When Earnhardt died I stopped watching the sport. However, if you were a Nascar fan you bought the products that sponsored the cars. If you loved the Black Three, you bought a Chevy. If you loved Darrell Waltrip, you bought Tide to do your clothes. And so on.
Try to stay away from penny stocks. Only a few go from 1 cent to $10 a share or more. Back in the 90's I bought ticker symbol IDID. It was like 3 cents or something. Shot up to $2 and we were thinking wow , we can eat meat today. Wrong. It went down like rock because IDID stole their technology. It was mess. Went down to the pink sheets , which is zero and out of business.
During the Sillicon Alley days it was interesting. These were tech companies in NYC that started on a cokctail napkin at a bar and some banker thought it was a good idea. we even had a web site for it. It was New York New Media. It was a job board and a new compnay board. You knew then would IPO. A disaster. I bought The Mining Company at $16. Went down and down until About.com bought them out. Did nothing for me. Doubleclick was huge in those days. Not anymore.
The car companies used to be safe. Back in he day. I wouldn't do it now. I'm not into it.
The bottom line is do research. Be safe. And take a chance on a small scale. It just might work out like it has for me a few times. Your main portfolio should be big caps and safe. Just do the research and find the next big thing and take it for a ride.
I hope this helps.
James
Singlemaleinnj Wow singlemale ... thanks for all that information!
And thanks everyone else too.
GC ... I am wondering if my portfolio is mostly NOT stocks, as you suggest. Maybe that would explain why it always comes out ahead. Need to investigate .........
In the beginning Patriot Coal blamed regulations for its woes but cheap, clean, natural gas might have been a bigger culprit. Plus Patriot was still buying more coal in 2008; not exactly a savvy financial move to be acquiring huge new stores of coal given the market.
http://dealbook.nytimes.com/2012/07/09/patriot-coal-files-for-bankruptcy-protection/?_php=true&_type=blogs&_r=0
Patriot Coal played some bankruptcy games, escaped some financial payments, raised lots of capital, and emerged as a private company looking pretty good.
Did they thank Obama?
http://finance.yahoo.com/news/patriot-coal-emerges-well-capitalized-211600478.html
Like I said, you can make some smart moves but it's the surprises that get you while the big guys skate free.
I foresee an IOS (Apple) based system in future cars taking over. If this happens, Sirius XM will drop like a rock. There prices are too high, who is going to pay $10 to $20 a month unless you live in your car. Smart phones have taken over. The only thing Sirius XM has is a little bit of good unique content, but Howard Stern is not going to be around forever...
iJay We listen to sirius ALL THE TIME.... IN OUR HOUSE. We don't even have it in our cars anymore (I listen to Pandora in the car, it' free.) Sirius is still far better than radio for my musical tastes.
BTW, I don't know anyone who has siriusxm that still listens to Howard Stern.
botheredbyuu2 JR
I don't listen to that a-hole Stern on XM. He ran his course.
60's on 6 Forever!!!
The best music ever made.
Really JR. Stern is more popular then ever. He's the only thing keeping Sirius alive.
He's not popular with anyone I know, let alone anyone I know who uses siriusxm. USED to be, but not for a long time now. Seems to me his gigantic contract payment might be part of any "financial problem" siriusxm may be having....
Have not listened to Stern since he went to Sirius. Loved his show on regular radio but I sure was not going to pay for that toilet talk...
Stern's 1st contract of 5yrs $500mil paid for itself in less than 2 yrs. they went from 600k subscribers to 7mill. Even if half those new subscribers paid the monthly charge that's 3mill x $180yr= $540mill. Not to mention he got paid a good portion of that is stock so he didn't come close to collecting it all. He jokes that he needs the stock to hit $7 to be able to make $ of the deal.
His level of guests has increased over the yrs and he has dialed down the trash allot since his 2nd marriage. His 2 channels are 2 of the top 5 listened to channels on Sirius.
http://en.m.wikipedia.org/wiki/Sirius_Satellite_Radio
Channel 38 Ozzy's Boneyard is quality....
The thing with the stock market is the Federal Reserve Bank Bernanke/Yellen/Obama have been pumping 85 Billion a month into the banking system - take that away and let me know where those stocks are at...lol
It's a false economy - smoke & mirrors 2008 was about the housing bubble - 2014/15 will be about the stock market bubble. It's a house of cards.
RU 
fitter One of the best things I ever did was get the lifetime XM radio when they were promoting it for $299. I haven't paid for that radio for 5 years. Wish I had bought two of them. I do pay for the car radio. I listen to sports, Lithium, and the NFL. Haven't listened to Howard in over 15 years. I heard enough of "Heeheee, boobs Robin, boobs'.
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