<p>I am having trouble understanding stocks, here is my question:</p>
<p>So I understand that stocks rising in value are worth more, etc. What I am having trouble understanding is, say a person buys some stocks one day using 50 dollars. Then, later, they all go up in price. Great! They are worth more! Now this person has more money (in assets). Okay, so now this person wants to invest more because investing more and buying new stocks or more of the old stock = more money.</p>
<p>So how does this person invest more money and buy new stocks if all the money made (let's say +150 dollars because it started as 50 and became 200) is tied up in those old stocks that have gone up in price. Without selling these current stocks that have shot up and that this person owns, where does the person get more money to invest?</p>
<p>Basically, if I start with say, 100 dollars, and I invest it and somehow make it worth 120 dollars (in stock value), and I want to invest in more stocks (more of the old or some new ones) to make more money, how could I buy more if, even though I have more "money", I can't buy any more stocks with it because all of this money I now have (the $120) is tied up in the old stocks.</p>
<p>Do you get what I am asking?</p>
<p>Everyone builds up wealth starting small and reinvesting, but I do not see how one can do that without selling old stocks. I feel like it is done all the time, though. Because I am pretty sure people don't just sell all the time?</p>
<p>There’s no way money is going to magically appear so you can invest in new things. You either sell the stocks for money or get a job and make more money. I have no idea how you don’t understand this.</p>
<p>NOTE:</p>
<p>I have no experience with stocks, but I have a Doctorate in Common Sense.</p>
<p>Like the previous poster said, and as you somewhat pointed out. Assuming you talking about straight broker to investor transactions, you must first sell the quantity of stock before you can invest in something else, or invest more in that same stock. </p>
<p>This buying on margin that you are referring still requires you have actual money, it would just allow you to purchase, say for instance, an amount of stock for 1/10 its actual cost, thus giving you a lot more leverage (ie. you’ll make 10x the profit or 10x the loss then you would if you didn’t buy on margin.). </p>
<p>Feel free to ask anything else, as markets and finance are my favorite topics.</p>
<p>A few things. No one starts out with $50 and throws it all in one stock. Many people who intend to make money usually start with about $50,000 to diversify and build up a proper portfolio (people who want to use trading and investment as their primary source of income usually start off with well over $100k-$200k. Second of all, almost no one has 100% of their bankroll in the stock market. Depending on the market’s mood, the majority of people have anywhere between 0% and 75% of their total allocation for trading in the market. </p>
<p>I know you’re just using it as an example but I want to really clarify this. Starting out with a $100 account is a great way to lose $100. Don’t forget that you’re charged fees for every trade you make. Most online trading tools charge $10-$15 *per trade<a href=“$20-$30%20for%20every%20complete%20transaction”>/I</a>, not to mention any extra fees you might incur. The more money you put into a stock, the larger your potential returns. I think that anything <$5000 is way too low to make any significant gains (and by significant, I mean very small gains of even just a few hundred dollars a month). </p>
<p>As for your actual question, this seriously is a common sense thing. Like I said before, most people will not have thrown all of their allocated money into one stock. You should have plenty more available should you decide to buy more without selling. </p>
<p>And it’s not like you’re just going to keep your money in these stocks anyway. You’re going to have to sell eventually. Money in the market isn’t real money.</p>
<p>Yeah, you’re going to need to get a job. And you’re going to need to start off with more than $100. Assuming fairly active trading (once a week), fair returns of 7%, at 100% in the market, you still won’t be able to break even on a $1,000 account after trading fees.</p>