Dunno if this is the right forum

<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>Thanks.</p>

<p>They sell the profiting stocks…?</p>

<p>most unsophisticated investors (the average person like you are I) would just enough stock to cash out the profit and keep their principal invested. </p>

<p>For example, you buy 100 shares of Intel (INTC) today at $21.25…you just invested $2,125. Let’s say that in 2 months INTC goes up to $27.00. Your shares would now be worth $2,700…on paper you just made $575. Now let’s say you want to re-invest the profits in order to diversify your portfolio…you would sell 21 shares (or $567 worth of stock)…you would have to pay taxes on the gains (taxed at ordinary income + short-term capital gains tax). Let’s assume this ends up being ~35%. So now you just cashed out $369 which are free to re-invest and at the same time you still have $2,133 invested in INTC. </p>

<p>More sophisticated investors also trade on margin…to put it in simple terms you are basically borrowing money from your brokerage. Look this up on a place like investopedia…</p>

<p>In all reality though you should be fine just doing what’s listed in paragraph 1.</p>

<p>You do it on margin.</p>

<p>[Investor</a> Tips: Margin - Borrowing Money To Pay for Stocks](<a href=“http://www.sec.gov/investor/pubs/margin.htm]Investor”>SEC.gov | Margin: Borrowing Money to Pay for Stocks)</p>