Understanding Where Money Goes in the Stock Market

Understanding Where Money Goes in the Stock Market When a stock market price for a company suddenly takes a nosedive, a stakeholder may wonder where the money they invested went. Well, the answers not so simple as someone pocketed it. Money that enters the stock market through investment in a companys shares stays in the stock market, though that shares value does fluctuate based on a number of factors. The money invested initially in a share combined with the current market value of that share determine the net worth of shareholders and the company itself. It may be easier to understand this given a specific example such as three investors - Becky, Rachel, and Martin - entering the market to buy a share of Company X, wherein Company X is willing to sell one share of their company in order to increase capital and their net worth through investors. An Example Exchange in the Market In this scenario, Company X has no money but owns one share that it would like to sell the open exchange market while Becky has $1,000, Rachel has $500, and Martin has $200 to invest. If Company X has an Initial Public Offering (IPO) of $30 on the share and Martin buys it, Martin would then have $170 and one share while Company X has $30 and one less share. If the market booms and Company Xs stock price goes up to $80 per share, then Martin decides to sell his stake in the company to Rachel, Martin would then exit the market with no shares but up $50 from his original net worth to now total $250. At this point, Rachel has $420 left but also acquires that share of Company X, which remains unaffected by the exchange. Suddenly, the market crashed and Company X stock prices plummet to $15 a share. Rachel decides to opt out of the market before it goes any further down and sells her share to Becky; this places Rachel with no shares at $435, which is down $65 from her initial net worth, and Beck at $985 with Rachels stake in the company as part of her net worth, totaling $1,000. Where the Money Goes If weve done our calculations correctly, the total money lost has to equal the total money gained and the total number of stocks lost has to equal the total number of stocks gained. Martin, who gained $50, and Company X, who gained $30, have collectively gained $80, while Rachel, who lost $65, and Becky, who is sitting on a $15 investment, collectively lost $80, so no money has entered or left the system. Similarly, AOL’s one stock loss is equal to Becky’s one stock gained. To calculate the net value of these individuals, at this point, one would have to assume the current stock exchange rate for the stake, then add that to their capital in the bank if the individual owns stock while subtracting the rate from those who are down a share. Company X would, therefore, have a net value of $15, Marvin $250, Rachel $435, and Beck $1000. In this scenario, Rachels lost $65 has gone to Marvin, who gained $50, and to Company X, who has $15 of it. Further, if you change the value of the stock, the total net amount Company X and Becky are up will be equal to $15, so for every dollar the stock goes up, Becky will have a net gain of $1 and Company X will have a net loss of $1 - so no money will enter or leave the system when the price changes. Note that in this situation nobody put more money in the bank from the down market. Marvin was the big winner, but he made all his money before the market crashed. After he sold the stock to Rachel, hed have the same amount of money if the stock went to $15 or if it went to $150. Why Does Company Xs Value Increase When Stock Prices Fall? It is true that Company Xs net value does go up when the stock price goes down because when the price of the stock plunges, it becomes cheaper for Company X to repurchase the share they sold to Martin initially. If the stock price goes to $10 and they repurchase the share from Becky, they will be up to $20 as they initially sold the share for $30. However, if the stock price goes to $70 and they repurchase the share, they will be down $40. Note that unless they actually make this transaction Company X does not gain or lose any cash from changes in the share price. Lastly, consider Rachels situation. If Becky decides to sell her share to Company X, from Rachels perspective it doesn’t matter what price Becky charges Company X as Rachel will still be down $65 no matter what the price. But unless Company actually makes this transaction, theyre up to $30 and down one share, no matter what the market price of that share is. By constructing an example, we can see where the money went, and see that the guy making all the money made it just before the crash happened.

25 Favorite Portmanteau Words

25 Favorite Portmanteau Words 25 Favorite Portmanteau Words 25 Favorite Portmanteau Words By Mark Nichol One of the many compensating charms of the often infuriating English language is the ease with which speakers and writers may exercise creativity and inventiveness. One of its most inventive components is the portmanteau word one formed by combining two words into a single (and often deprecating and/or ironically humorous) term that denotes a new concept, or one for which a satisfactory term was heretofore unavailable. Here are twenty-five such terms, their parent words, and their meanings. 1. Affluenza (affluence/influenza): anxiety or dissatisfaction caused by submission to consumerism 2. Anacronym (anachronism/acronym): an acronym derived from a phrase no longer widely known (for example, radar) 3. Anticipointment (anticipation/disappointment): the letdown after hype gives way to reality 4. Backronym (back/acronym): a word presented as an acronym after the fact (for example, the name of the car brand Ford was derisively backronymed to stand for â€Å"Fix Or Repair Daily†) or mistakenly believed to be an acronym (the Morse code distress signal is erroneously said to stand for â€Å"Save Our Souls†) 5. Blaxploitation (black/exploitation): a genre of pulp entertainment most prevalent during the 1970s, when African American culture began to permeate US society that exploits clichà ©s about black people 6. Bodacious (bold/audacious): insolent or unrestrained, extraordinary or impressively large, or extremely attractive 7. Celebutant(e) (celebrity/debutant(e)): someone famous for being famous, with no apparent talent except self-promotion 8. Chillax (chill/relax): behave, calm down, or relax 9. Cocacolonization (Coca-Cola/colonization): the aggressive introduction or pervasive influence of American consumerism on other cultures 10. Cosplay (costume/play): wearing costumes and accessories that resemble those of characters from various forms of popular culture, or the subculture that engages in cosplay 11. Craptacular (crap/spectacular): entertainment so poor in quality as to be ironically captivating, or hyped but ultimately disappointing 12. Edutainment (education/entertainment): educational material presented in a format intended to attract with its entertainment value) 13. Frankenfood (Frankenstein/food): genetically modified food 14. Frenemy (friend/enemy): a supposed friend whose actions and/or behavior are characteristic of a foe 15. Gaydar (gay/radar): the ability to identify a person as a homosexual based on observation of the person’s appearance and/or behavior 16. Ginormous (gigantic/enormous): huge 17. Infotainment (information/entertainment): information presented in a format intended to attract with its entertainment value 18. Interrobang (interrogative/bang): a combination question mark and exclamation point 19. McMansion (McDonalds/mansion): a blandly generic large house 20. Metrosexual (metropolitan/heterosexual): a man who appears to be inordinately concerned about personal aesthetics and/or is perceived for this quality as being homosexual 21. Mockumentary (mock/documentary): a feature film that spoofs the documentary form 22. Netocracy (Internet/aristocracy): an elite demographic distinguished by facility with technology and online networking 23. Screenager (screen/teenager): the typical adolescent who indulges excessively in screen entertainment 24. Sexploitation (sex/exploitation): pulp entertainment intended primarily to titillate 25. Shopaholic (shop/alcoholic): someone addicted to shopping A portmanteau word, as described by Humpty Dumpty in Lewis Carroll’s Through the Looking-Glass, is (inspired by the word for a suitcase with two opposite compartments) a case of â€Å"two meanings packed up into one word.† Many such terms, most of which are in the mainstream vocabulary and some of which are not widely recognized as invented terms already exist. More mundane portmanteau words represent dual ideas in many contexts, including entertainment (cineplex, docudrama, infomercial), sports (heliskiing, parasailing, slurve), and technology (avionics, camcorder, pixel), as well as hybridization of breeds or species (cockapoo, jackalope, liger). Some older examples include electrocution (electricity/execution), motel (motor/hotel), motorcade (motor/cavalcade), prissy (prim/sissy, though it may be simply a variation of precise), rollicking (rolling/frolicking), and ruckus (ruction, rumpus). Want to improve your English in five minutes a day? Get a subscription and start receiving our writing tips and exercises daily! Keep learning! Browse the Vocabulary category, check our popular posts, or choose a related post below:100 Whimsical Words50 Latin Phrases You Should KnowProverb vs. Adage