The Basic Principles Behind Buying And Selling Stocks

by David Jenyns on July 9, 2008

Many people do not fully understand the process of buying and selling stock. Who sets the price on a corporation’s stock? An automobile manufacturer sells a new car to a dealer, who in turn sells it to a user. Some time later the user sells this car, now a used car, to a dealer. A car may be bought and sold through dealers several times before it is junked.


On the stock of a successful, established company, the price is apt to rise, as the company grows larger and older. A share of stock does not go to the “junk yard” unless the issuing corporation goes out of business.

The price of a share in a mutual fund is set automatically by the total market value of all the stocks and other property that the fund owns.

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