Simple question about the stock market if anyone can answer me.

[Derpy Hooves]

I want to know something. If you buy, say, 1000 shares in a company at $100 a share, you've invested $100,000. Now if this company loses so much in the market that share prices drop to $3 or so a share (and you failed to try and sell when you first saw it falling into the shitter), do you lose MORE than your initial investment? Like do you have to pay IN more money to the company? Or is it simply that you don't get a return because their losses outweigh your investment?

The reason I ask is this. Does anyone remember when GM was going bankrupt a few years ago? i was in 7th grade so it must have been around 2008-2009. Shares for GM were so low, you could purchase one for under $3, so lets just say it was $2.50. You could have bought 1000 shares for $2500 (give or take, due to it not really being that simple). Now this is a VERY SMALL investment on a real scale. IF in the event GM goes bankrupt or loses, you DON'T have to pay (just less return), it's not that big of a deal! You lost $2500, which compared to what others lose. But the chances of GM making a comeback, though low, were chances of you making a MASSIVE return. With your initial investment being only $2500, if the prices rose eventually, you could probably make even more money by just selling your shares off than waiting for a return. And as i said before, if you lose it, big deal! Its only $2500. which you can probably make back in 6 months if you are a normal working citizen that manages savings well (and i hope you can manage money if you are trying the stock market).

[Reverb Blaze]

I have no idea what the blueberry fuck you just said.

[Derpy Hooves]

I have no idea what the blueberry fuck you just said.

You bump my thread for no reason...
if we were a respectable forum i would post ban you from this board for a day.... but we aren't really respectable...

SO YOU GET BAN FOR A YEAR!!!!!

Naw.... but come on man! Why did you get me all excited?

[Ketchup]

1000 shares at 100 apiece then becomes 1000 shares at 3 apiece.
You've lost 97000 dollars IF you sell the shares you have.
As far as I know, you won't lose more than that unless the shares become even more worthless. I can't imagine a situation where you'd give more money to the company unless you wanted more shares.

[Reverb Blaze]

I have no idea what the blueberry fuck you just said.

You bump my thread for no reason...
if we were a respectable forum i would post ban you from this board for a day.... but we aren't really respectable...

SO YOU GET BAN FOR A YEAR!!!!!

Naw.... but come on man! Why did you get me all excited?

I got you excited? I told you. I have no clue. You know how old I am. I don't understand that kinda stuff.

[CamoBadger]

I'm with ketchup on this one. From my understanding, if the stock drops then you are just out that much money. If you did have to pay more back in, then I would be much poorer than I already am.

[Harmony Ltd.]

It's simple math, really.

if you buy X amount of actions of value Z

then the sum of how much you have in actions is calculated as SUM = X*Z



Ex : I buy 1000 actions [X=1000] at value 10 [Z=10] => the total value of the actions are :

SUM = X*Z = 1000*10 = 10000



Now, let's imagine the value from the action is divided by two :

Z = 10/2 = 5

the total value of your actions is now :

SUM = X*Z = 1000*5 = 5000



Let's imagine you're really bad at managing your money, and the action's individual value is now 0.1

Z = 0.1

SUM = X*Z = 1000*0.1 = 100



Basically, as long as the value of the actions [Z] is positive (and there's no reasons for them to become negative if my understanding of economics is correct), there is no way for the sum value of your actions to be negative, given that [X] (number of actions) can't be negative (as you can't have less actions than 0).



WHAT may be negative on the other hand is your profit margin on the investment.

[Derpy Hooves]

Well thank you Harmony for finally giving me a straight answer, so its technically true, you could make micro investments in failing companies with an off chance of winning and if you lose, you simply lose that small amount of money.

Its no different then a bad trip to Vegas, only you don't have as much fun!

[Admiral Stoic Rum]

you cannot technically lose more money than what you initially invested...

[Harmony Ltd.]

Now, you have to know that each time you trade actions on the stock market (be it buying or selling), the intermediaries you use to pass the orders take a share of it (even the stock market itself, IIRC).

So "micro-transcations" aren't a viable mean of playing the market if you have only a limited capital.

That's why banks and investment companies do their business in (big) bulks of actions, because then the costs of the operation is "negligible" (probably still more than your annual salary, but nothing compared to the amount of money that was moved).





The short answer is that if you are a random citizen, playing the stock market is exactly like playing the Casino :

the Bank always win.

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