Obama's Economy

why do people become bankruptcy when they invest?

if now i only put a small amout of my money into the market, for example 100k and that is it… why i can become bankrupt??? what factor that make i lose all the money and have to payback some more(like have to sale house… to pay for that)??
Another question about the gain and loss money when i invest. When the graph of the market is at the trought(the bottom) then i start buy in the stock, if the graph start increase then i gain money right?? and vice versa to the peak(the top) isn’t it??

Think of it this way….

Stock price can go high or low. Even if the price is low, ZERO is always lower. If you invested in cheap stock, you can still lose all of it, if the value goes to ZERO. One saving grace about regular stock investment is that you could NEVER lose more than what you paid to buy them. In another word, if you invested 100K, that’s all you can lose. 100K becomes zero.

If you bought on margin or SHORTed the stock, then, you could end up in a situation where your loss can be greater than what you invested. If you SHORTED, technically, your loss can be infinite.

I won’t explain what those things are, as you will not likely to understand them. For now, just remember those are bad things and stay away from them.

You need to buy on CASH and you buy stocks or bonds.

Unless you understand exactly what you are doing, do NOT do anything other than regular stocks or bonds. Do not try to do margins, shorts, or any other kind of exotic types. It can ruin you.

Yes, if you buy at the bottom and the price goes up, WHEN YOU SELL the stock, you gain money. If you buy at certain price and price goes down, you lose WHEN YOU SELL the stock. Until you sell, the gain or loss is called UNREALIZED gain/loss. Market fluctuates. That’s the nature of investing.

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