Losing money on Investment: Confused noob :(

[alexonline]

Hello everybody, Hoping you guys can help me please.

My question is;


>Suppose I buy a $1.00 Stock for $1000 ( and no leverage it's all my money!)
>Thats 1000 Shares.

>Lets assume the stock goes down to .80c

>>>> I AM NOW in negative territory. Will I have to give the broker more money in return when I sell it???????


I assumed the $1000 will just devalue itself. And the only money I would loose is what I put in and nothing else.


SO will I loose Only what I put in? Or will I have to give the broker more than $1000??????? ( assuming no leverage))!!!!!


Thanks so much so confused.

 

[tech/a]

Hello everybody, Hoping you guys can help me please.

My question is;


>Suppose I buy a $1.00 Stock for $1000 ( and no leverage it's all my money!)
>Thats 1000 Shares.

>Lets assume the stock goes down to .80c

>>>> I AM NOW in negative territory. Will I have to give the broker more money in return when I sell it???????


I assumed the $1000 will just devalue itself. And the only money I would loose is what I put in and nothing else.


SO will I loose Only what I put in? Or will I have to give the broker more than $1000??????? ( assuming no leverage))!!!!!


Thanks so much so confused.

You would receive back $800 less your brokerage.
And probably their latest stock pick.

 

[burglar]

... Thanks so much so confused.

You are so confused!

Suppose you buy 1000 Shares at $1.00 Stock for $1000
Your broker will put brokerage + GST on top of that.
Say $1017.99

Suppose you sell 1000 Shares at $0.80 for $800
Your broker will take brokerage + GST from that.
Say $800 minus $17.99 = $782.01

You will have lost $200 to Mr. Market and 2x brokerage (say $35.98) to the broker.

Repeat after me.

"The broker is not my friend!!"
"The broker is not my friend!!"

 

[alexonline]

You would receive back $800 less your brokerage.
And probably their latest stock pick.

Thanks,

But can I go negative? Like -500????????


is this possible. thats my fear. thats what i'm talking about. Can I go negative???????

 

[alexonline]

You are so confused!

Suppose you buy 1000 Shares at $1.00 Stock for $1000
Your broker will put brokerage + GST on top of that.
Say $1017.99

Suppose you sell 1000 Shares at $0.80 for $800
Your broker will take brokerage + GST from that.
Say $800 minus $17.99 = $782.01

You will have lost $200 to Mr. Market and 2x brokerage (say $35.98) to the broker.

Repeat after me.

"The broker is not my friend!!"
"The broker is not my friend!!"

You would receive back $800 less your brokerage.
And probably their latest stock pick.

Thanks,

But can I go negative? Like -500????????


is this possible. thats my fear. thats what i'm talking about. Can I go negative???????

 

[burglar]

... Can I go negative???????

You should not bet with money that you cannot afford to lose!
Should the share price go to near zero (sometimes happens) you will owe the brokerage if you sell!

Say $17.99 No more!!

You may sell them at such a low price to get the loss to offset other profitable Capital Gains Tax events.




But why do you want to buy a loser?!!

 

[alexonline]

You should not bet with money that you cannot afford to lose!
Should the share price go to near zero (sometimes happens) you will owe the brokerage if you sell!

Say $17.99 No more!!

You may sell them at such a low price to get the loss to offset other profitable Capital Gains Tax events.




But why do you want to buy a loser?!!

NOT trying to be rude, but this is a hypothetical to understand a part of the bloody market!!!!!!!


i'll leave my question for someone who is capable of answering such a simple question to someone who is curious to how it works.

Thanks,

But can I go negative? Like -500????????


is this possible. thats my fear. thats what i'm talking about. Can I go negative???????

 

[burglar]

NOT trying to be rude, but this is a hypothetical to understand a part of the bloody market!!!!!!!


i'll leave my question for someone who is capable of answering such a simple question to someone who is curious to how it works.

Thanks,

But can I go negative? Like -500????????


is this possible. thats my fear. thats what i'm talking about. Can I go negative???????

Not trying to confuse you further, the answer was there.

You can go negative one brokerage only and only if you sell.

One brokerage when you buy.
One brokerage when you sell.

 

[DeepState]

Hello everybody, Hoping you guys can help me please.

My question is;


>Suppose I buy a $1.00 Stock for $1000 ( and no leverage it's all my money!)
>Thats 1000 Shares.

>Lets assume the stock goes down to .80c

>>>> I AM NOW in negative territory. Will I have to give the broker more money in return when I sell it???????


I assumed the $1000 will just devalue itself. And the only money I would loose is what I put in and nothing else.


SO will I loose Only what I put in? Or will I have to give the broker more than $1000??????? ( assuming no leverage))!!!!!


Thanks so much so confused.

If you are buying the stock, physical not via CFD, you will pay to the broker $1000 + brokerage + GST on the brokerage.

That figure will leave your bank account or wallet (if you prefer to pay by cash) before the trade settles. If the stock goes to zero, or goes to $50, nothing more will be requested out of your bank account. The broker will not make a margin call because you did not buy on margin.

Is this a joke? 2:1 on. Maybe you should watch the movie 'Margin Call' to see what a margin call is and is not. Actually, it doesn't mention much about the mechanics of a margin call. It's just a good movie. It'll probably turn out cheaper than investing in the market until you get up to speed a little more.

Hope you are enjoying yourself Alex.

How much wood does a Woodchuck chuck? I'm so confused that a Woodchuck can't chuck wood. What gives???

 

[Joe Blow]

i'll leave my question for someone who is capable of answering such a simple question to someone who is curious to how it works.

Alex, please show a little more courtesy to those who are trying to help. Remember, you are the one asking for assistance here. Nobody is under any obligation to respond, so any reply, whether or not it is the answer you are seeking, is somebody trying to lend a hand in whatever way they can.

 

[darkhorse70]

You cant go negative son. As long as its not a leveraged instrument.

 

[skc]

You cant go negative son. As long as its not a leveraged instrument.

To be precise, you can't go negative on a fully paid ordinary share.

If you are holding partly paid shares, however, you are leaglly liable to pay up the unpaid value. This is the only instance which I can think of where you can lose more than your initial outlay. Thankfully, partly paid shares are pretty rare these days (I don't know of any one being listed on the ASX at this moment in time).

See the saga in the BrisConnections thread...

 

[burglar]

There are many scenarios in which you may lose your $1000:

I will describe one of the simplest.

You buy the shares in a company which is not solvent!
They don't tell you they are not solvent.

They go into Trading Halt.

Now you cannot sell your shares.

The company goes into administration.
The receiver is called in.

He slowly sucks the company dry.
Why slowly ... because he cannot legally suck quickly!!

Meanwhile the years pass by.
When the receiver is finally finished, he will announce that there is nothing left.

 

[luutzu]

Hello everybody, Hoping you guys can help me please.

My question is;


>Suppose I buy a $1.00 Stock for $1000 ( and no leverage it's all my money!)
>Thats 1000 Shares.

>Lets assume the stock goes down to .80c

>>>> I AM NOW in negative territory. Will I have to give the broker more money in return when I sell it???????


I assumed the $1000 will just devalue itself. And the only money I would loose is what I put in and nothing else.


SO will I loose Only what I put in? Or will I have to give the broker more than $1000??????? ( assuming no leverage))!!!!!


Thanks so much so confused.

Let a noob summarise what others have said for you.

When you buy that 1000 stock at $1.00, it costs you $1,000. To buy it your broker charge you $19.95 (let say). The $1000 goes to the previous owner, the brokerage goes to the broker.

When the $1000 + 19.95 goes out of your bank account, you own 1000 share in that company and whatever happen to its quoted price has nothing to do with your broker.

If the price then goes to 80 cent or $80, all the loss or gain is all yours.

The broker will charge nothing until you ask them to again sell this stock.

The lowest a fully paid stock can go down is to zero... in that case, you will lose all your money. Company will wind up and if there's a few bucks left after taxes and lenders etc. are paid, the Administrator will divide it up among the shareholders - one of whom is you, 1000 shares of which is yours.

 

[Smurf1976]

You buy 1000 shares at $1 and it drops to 50c when you sell. You've lost $500 plus the cost of brokerage.

Worst case, the company goes broke and the shares are literally worthless. You've lost $1000 plus brokerage.

Assuming no leverage (borrowed money) is involved, you can't lose more with ordinary shares than you invest apart from the cost of brokerage.

Realistically, unless the company really does go broke and is wound up, the shares will always be worth something, the only question being how much.

For big companies, for example Telstra or Woolworths, actually going broke is highly unlikely. It's not totally impossible, but if the Commonwealth Bank or BHP really did go broke then you losing $1000 is going to the least of your worries really. The whole country would face a degree of crisis if someone really big actually went bust (especially if it's a major bank or someone like BHP, Wesfarmers etc with a huge number of employees and a large spread of physical operations).

On the other hand, some small mineral exploration company that most have never heard of could certainly go bust. Their entire business is hoping to find something then mine it at a profit. If they don't find anything, or what they find can't (for whatever reason) actually be mined profitably well then they don't have an income stream. Once the cash runs out, either they try and raise more cash somehow (issue more shares or borrow money) or that's it, game over. Such companies do go broke from time to time, and it's not limited solely to the example of wannabe miners (though if they're a big risk certainly).

ANZ or Commonwealth Bank etc goes broke = highly unlikely and a national crisis if they did. Shares in companies like that going to zero is up there with ships sinking and meteorites hitting the earth in terms of probability - possible but unlikely.

Small unheard of company goes broke = it happens and nobody apart from those directly affected (staff, shareholders, suppliers etc) really cares. Bigger risk there, but also the potential for huge gains if the company really does find oil etc or whatever they're trying to do.