ttly lost about stocks?

Question

How do people make money on the stocks they buy?

What is a Blue Chip stock?

What happened on October 29th, 1929?....heard something happened related to stocks!!??

Answer 1

Several years ago there was a fad called day trading and a cartoon family (Foxtrot) had a father who decided to become a day trader. He had a geek son who wrote a computer program to help dad out. Well, dad was losing, big-time, and the family was about to go broke, when the son realized an important problem with his computer program, "Stocks go down?"

People trade ownership shares, stocks, in major companies for two reasons. One is that people trade ownership in companies. Another is that people want to be part of the ownership in companies. These are two different things. We sometimes define one as speculations, or trading. We sometimes define the other as investing. Think of it as if one rancher bought some calves to fatten up and sell a little later when they weighed more (cattle are priced by their weight, fatter the cow, the better the price), and another rancher bought a bull and some cows and helped them make a bigger herd by producing calves that grew up to produce more calves that.... The one is a speculation, the other is an investment.

There are some companies that are famous for long, steady growth and profitability. Consider these (I'm giving the stock symbol and name) from a portfolio that I have, and you can look up information on their prices at any free business site on yahoo finance or cnn business, etc.: AIG (American International Group, insurance); BAC (Bank of America); C (Citigroup); COP (ConocoPhillips, oil); CVX (Chevron, oil); GE (General Electric, diversified manufacturer); IBM (computers and services); MO (Altria Group, tobacco and foods); WMT (Wal-Mart, retail); XOM (Exxon, oil). These were selected from the publicly traded companies that made the most profits in the previous year. Pretty much all of them are what are called "blue chip" stocks, the high value companies. The market value of this portfolio is a little over $90,000 and since around May it is about a 40 percent increase.

As I previously noted, "Stocks go down?", yes that definitely happens. If you look at the charts of the market values of these companies over this year (or any period you choose), you will find they have gone up and down numerous times, each. All during that time, there were traders who were making, or losing, money on these stocks. Successful ones sold the stock when the price was falling and bought it when the price turned around. But, as my example illustrates, there was the potential for success at buying something good and simply holding it. But just as there are days when the stocks rise in price a great deal, like yesterday, there are days (fortunately, not many of them) when stocks fall and fall hard, like the day you mentioned. A recent one was the day after the 9/11 disaster in New York City. But the optimism and hope brought the market back and above that place in the weeks that followed. What used to be one of the world's richest men, J. P. Getty, quipped that your date was the day he stopped being "an oil man" because with all the really cheap stocks, he began buying up companies, as in whole or nearly whole companies really cheap and selling them again later when there was interest in them again, those that he didn't keep inside his Getty Oil company. Oil made him a billionaire, but stocks made him more billions, which he plowed back into his oil business, or into his mansions, or into his fabulous art collections with which he devoted most of his time in his later years.

There you are. Prices change daily, hourly, even by the minute and people who are good at buying and selling at the right time make money, and lose money, on trading them. Some companies make profits and grow enormously because of the business that they are in and people who buy those stocks will see the value go up, or down, based on the business those stocks represent. But don't forget, "Stocks go down?"--yes, they definitely do.

Answer 2

A blue chip stock is a company that is a staplke of the economy. Think IBM, General Electric, Microsoft, Procter and Gamble. On that date the stock market took a huge loss (greater than 20%). It was caused primarily by overleverage that came from investors borrowing too much much to invest in stocks. As the prices of stocks started to decline people had to sell their stocks to pay off their loans. This created a kind of smowball effect of selling.

Answer 3

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