Posted By admin on February 17, 2009

Stock Bond

Where do the money come from Stock, bond?

If I made money from the stock or bond, was that mean I got money from someone who's playing the stock or bond. I want to know where do the money come from and where to while we make a profit or loss.

If you took a gain on a stock position - that money is from a gain in the value of the piece of the company you owned. Look at it as if you owned one brick in the corporate headquarters building. If that company is doing well, making profit, moving product, whatever it does to become more valuable - someone else will want to own that brick at a higher price and will buy it from you. If that company isn't doing so well - their miracle drug got pulled by the FDA, they are losing money, nobody is buying what they sell - then the value of your brick in the company isn't worth as much and your stock price goes down.

Bonds are different - they have two values in play. The first, the bond is a loan you made to a particular company or government. That company is paying you back every six months in terms of interest. You holding that outstanding debt at a certain interest rate has value also - and you can sell your loan (the bond) to someone else. In times that rates are going down, (like now), generally the value of higher yielding bonds is increasing - therefore you can sell at a premium. If rates are rising, then generally bond prices are falling - it's an inverse relationship.

Category: Antiques
Tags: business, finance, investing, money, stock bond correlation, stock bond mix, stock bond power, stock bond ratio, stock bonds, stocks