Zero Sum Game

Most people think the stock market is a zero sum game because there is a buyer for each seller and seller for each buyer so each cancels the other and everything is equal. Not quite.

There are losers here, both the buyer and the seller because each one paid a commission to buy and a second commission to sell. This eats away at the profit of the winner and adds to the loss of the seller if he sold for less than he paid.

How does buying and selling of a stock effect the company? When you buy GM stock from your broker he is completing a transaction between you, the buyer, and someone else, the seller. The company has nothing to do with the transaction other than change the name of the shareholder on their record books. It has no effect on the corporation's finances. It is merely an expression by an individual; fund or pension plan that they think the company's stock will go up.

There is one time that purchasing a company's stock does affect their bottom line. That is when you purchase a new offering called an Initial Public Offering or IPO. The money that you pay for that stock then goes directly to the company and not to another individual. That cash is used as the company sees fit usually to fund expansion to increase both sales and profits.

Now think for a minute about the people who decided to sell their stock in Phillip Morris because they did not want to own a tobacco company stock. Will this make any difference to the company? Not a twit. The person who bought that stock was interested in only one thing ? will it go up so I can make a profit? That is why socially responsible investing makes no sense at all. It only makes the person feel better and is not a true investment decision.

Let's say you bought a stock at $20/share and sold it at $40. Double your money. Great. The guy that bought it sold it at $60 and that person sold it to someone for $80/share. Everyone is happy. So far. But this last stock buyer now watches the stock head down and he decides to get out at $60. Mr. $60 watches it drop to $20 where it dies and does not recover. Sounds like Lucent doesn't it? The last 2 buyers don't think this is a zero sum game.

Let me add that I think the smartest guy in the bunch was the one who took his loss and sold out at $60. He limited his loss and still has money left to find a better issue. He was smart enough not to "wait for it to go back up so he could get out even". Unfortunately, most people think this way. It may be close to a zero sum game, but you don't want to end up with the zero.

Copyright 2005

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

1-888-345-7870; http://www.mutualfundmagic.com

whole house cleaning Highland Park ..
In The News:

AI-powered autonomous trucks from Waabi and Volvo target U.S. freight driver shortage with Level 4 self-driving technology and NVIDIA computing platform integration.
Survive flight disruptions with expert travel tips: Book early morning flights, download airline apps and know your refund rights during service cuts.
Apple's iOS 26.1 update delivers major security fixes, performance boosts and enhanced privacy controls for your iPhone. Discover why updating now protects your data.
Russian hackers use fake CAPTCHA tests to spread dangerous malware targeting governments and journalists. Learn how to protect yourself from these deceptive attacks.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
Miami-Dade debuts America's first autonomous police SUV with AI cameras, drone deployment and real-time crime detection in groundbreaking law enforcement pilot.
Bank impostor scams cost Americans $2.9 billion as criminals use AI voices and caller ID spoofing to steal life savings. Learn nine essential fraud protection tips.
Foreign-owned apps secretly harvest personal data from seniors, making them prime targets for scams. Learn how to protect your privacy and stop data brokers today.
Sens. Josh Hawley and Richard Blumenthal introduce bipartisan GUARD Act to protect minors from AI chatbots through mandatory age verification and disclosure requirements.
Ghost-tapping scammers exploit wireless technology to drain accounts through small transactions, but RFID-blocking wallets and transaction alerts can protect you.
French pilot project demonstrates wireless charging roads that can deliver over 300 kilowatts of power to EVs while driving, potentially eliminating range anxiety.
YouTube's Ghost Network spreads information-stealing malware through thousands of fake videos offering cracked software, using compromised accounts and fake engagement.
Protect your privacy by disabling your smart TV microphone. Most TVs have hidden mics that listen even when voice commands are off. Learn quick steps to stop unwanted audio capture.
SessionReaper vulnerability hits Magento and Adobe Commerce stores, compromising 250+ sites in one day. Hackers steal data and hijack shopping sessions.
Master essential parental controls and digital safety tools to protect your kids online. Learn screen time limits, location settings and privacy controls every parent needs.
Cybersecurity expert shares six essential steps to protect against dark web threats, including data removal services, password managers and antivirus software.
NVIDIA GPU space mission could revolutionize cloud services by enabling orbital data centers that make apps, games and AI tools faster and more efficient.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
Microsoft warns Windows 10 users face serious security risks as 90% of ransomware attacks target unsupported systems. Learn why upgrading to Windows 11 is crucial.
Nike unveils Project Amplify, revolutionary motorized shoes developed with Dephy that add powered assistance to every step for runners and walkers.
Cybersecurity experts warn about one of the largest credential compilations ever found, urging users to check "Have I Been Pwned" and change passwords immediately.
Quick iPhone and Android battery optimization techniques help your device stay powered all day by turning off hidden features that secretly drain power in the background.
Kodiak Driver autonomous truck achieves perfect 98 safety score, matching top human fleets in groundbreaking AI evaluation by Nauto's VERA system.
New 401k catch-up contribution rules in 2026 will change taxes for high earners over 50. Learn how scammers exploit these changes and protect your retirement savings.
Kurt Knutsson's guide covers social media privacy protection through location settings, account privacy controls and two-factor authentication to prevent scams and data breaches.

When?

When will the stock market stop going down and start... Read More

The Top 10 Reasons to Invest in Mutual Funds

Everyone who follows the financial news has heard of mutual... Read More

Why Investors Use Financial Planners

Do you have a financial planner? Does one of your... Read More

Precision Money Management

This article describes the model of a natural relationship between... Read More

One Way Street

Ever turn down a street, get half way and suddenly... Read More

Learn to Calculate a Stock?s Pivot Point

Stocks breakout from properly formed bases everyday but many investors... Read More

Advisory Service for You?

It depends on your level of understanding of the market... Read More

Emotional Involvement

I'll bet with almost anyone that has stocks or mutual... Read More

So, What is This Stock Market Thing Anyway?

We've all heard of the stock market and probably have... Read More

Discipline

One of the great "secrets" of successful people is discipline... Read More

Online Trading Strategy: Collecting Cash when Stocks Go UP - It PAYS to Know More than Others

When it comes to stock market trading it PAYS to... Read More

Getting Even

I know there are a lot of you out there... Read More

Trading Education: The Best of Both Worlds!

I made my very first investment in the stock market... Read More

Mutual Fund Ball and Chain

The broker told me not to sell because the mutual... Read More

Buying Mutual Funds

It looks like the market is ready to start up... Read More

Play another Day

Money management starts with protecting your capital, realizing profits and... Read More

The Secret Art of Backtesting

If you have not back tested your trading system, you... Read More

The Stock Market Investor?s Worst Enemy

Every stock market investor faces one primal enemy. An enemy... Read More

Mid-Cap Stocks: Asset Class with an Identity Crisis

Much like the middle child, mid-cap stocks have long struggled... Read More

Lies, Damn Lies and Mutual Fund Returns

How many times has this happened to you? You're at... Read More

Bollinger Bands Strategies

The Bollinger Band theory is designed to depict the volatility... Read More

Roller Coaster

I love roller coasters. The steeper the better. High and... Read More

Hedge Fund Advertising

Have you seen all those big full page ads for... Read More

Analyst Reports

When you become interested in a stock or mutual fund... Read More

Hold Em and Fold Em

When most analysts, financial planners, fund specialists and investors try... Read More

pet-friendly home cleaners Glenview ..