Quote:
Originally posted by Stompy
What I don't understand is how you make money.
Let's say all the stock you pick are good stocks, and you invest 1000. 50 years later, that becomes this ENORMOUS amount. How?
If I buy 100 shares of something that's $10, isn't my investment forever based upon the value of the stock?
In order for me to make $1,000,000, the value of the stock would have to be $10,000, right? Not exactly.. and that's what I don't get.
Where does the exponential growth come into play?
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Well, hopefully the value of the stock increases--sort of like how, I dont know, some cars' values increase. Only its not tied to age necessarily
Also, like BigBlue said, re-investing dividends. Stocks pay dividends, which are a portion of the company's earnings. If you reinvest this, your ownings can go up.
Stock will also sometimes split, basically meaning the company is making more shares of stock--so your ten shares may now be twenty shares. If the price continues to go up, you make more money.
Look into index funds. You may also want to read some of Burton G. Malkiel's books--he has some great insight into the stock markets.