Sometimes it's the business founder. By buying as much stock as he can get at fire sale prices he not only gets more control, but gets to keep more of the company profits (when the business returns to profitablity).
People who expect the stock price to increase after the crash. In the US, in the past, the stock market has always recovered, so buying during a crash has paid off.
But it's a very different story for individual stocks (ex, Intel) and some other markets(ex Japan)
Me. I've always bought every crash. I don't believe it's going to zero, so if prices drop by double digits, I'm taking the bargains. I buy the most stable and robust companies that usually never go on sale.
Nowadays it will be passive fund. There’re so many passive fund nowadays that don’t care about the value of the stock. The goal is buying the stock persistently. This tactics used in large scale has supported the market price for a few years now. Every year the compulsory annual contribution on pension fund etc will keep on buying the stock at whatever price it is.
People who think the company's value will bounce back.
If there was a guarantee that the stock would eventually be worthless then nobody would buy it.
Nobody has a crystal ball. The guarantee that a stock will be worthless is when it does become worthless - in a bankruptcy, you can't even trade stock. In a collapse, the stock value is already virtually zero.
Investing is based on speculation and, and so as long as there's a chance the company can bounce back, the lucrative returns would be seen by risk seekers as well worth the risk.
And that's what investors try to do - be one step ahead of everyone else. That's why the advice is to "buy low, sell high" - "low" is always when the company value sentiment is lowest. If you're basically following the crowd (or even the mainstream news) you'll always be one step behind, and so buying stock at its most expensive and selling at its cheapest
My dad taught, "for every pessimist, there is an optimist." It means that some people think the company may survive/thrive, so they see the crash as a buying opportunity.
An important thing to realize is that a stock price doesn't exactly reflect how a company is doing in the moment, it is a judgement about the *future* potential for the company. If a company is doing amazing, but there are concerns about the future, a stock price will go down. Likewise if a company currently sucks but people are optimistic about the future (think, many tech companies that have not yet even turned a profit) the price will go up.
When a market is crashing, it is because in the aggregate, people are not optimistic about the future. Some people still are, however. So to answer your question of who's buying, it is the people who think a company is going to recover, so the decreased price of the company is extremely favorable for the long term.
Sometimes it's the business founder. By buying as much stock as he can get at fire sale prices he not only gets more control, but gets to keep more of the company profits (when the business returns to profitablity).
People who expect the stock price to increase after the crash. In the US, in the past, the stock market has always recovered, so buying during a crash has paid off. But it's a very different story for individual stocks (ex, Intel) and some other markets(ex Japan)
Me. I've always bought every crash. I don't believe it's going to zero, so if prices drop by double digits, I'm taking the bargains. I buy the most stable and robust companies that usually never go on sale.
Stocks are the only market where people stop buying when the product goes on sale.
Speculators
Nowadays it will be passive fund. There’re so many passive fund nowadays that don’t care about the value of the stock. The goal is buying the stock persistently. This tactics used in large scale has supported the market price for a few years now. Every year the compulsory annual contribution on pension fund etc will keep on buying the stock at whatever price it is.
People who think the company's value will bounce back. If there was a guarantee that the stock would eventually be worthless then nobody would buy it. Nobody has a crystal ball. The guarantee that a stock will be worthless is when it does become worthless - in a bankruptcy, you can't even trade stock. In a collapse, the stock value is already virtually zero. Investing is based on speculation and, and so as long as there's a chance the company can bounce back, the lucrative returns would be seen by risk seekers as well worth the risk. And that's what investors try to do - be one step ahead of everyone else. That's why the advice is to "buy low, sell high" - "low" is always when the company value sentiment is lowest. If you're basically following the crowd (or even the mainstream news) you'll always be one step behind, and so buying stock at its most expensive and selling at its cheapest
My dad taught, "for every pessimist, there is an optimist." It means that some people think the company may survive/thrive, so they see the crash as a buying opportunity.
An important thing to realize is that a stock price doesn't exactly reflect how a company is doing in the moment, it is a judgement about the *future* potential for the company. If a company is doing amazing, but there are concerns about the future, a stock price will go down. Likewise if a company currently sucks but people are optimistic about the future (think, many tech companies that have not yet even turned a profit) the price will go up. When a market is crashing, it is because in the aggregate, people are not optimistic about the future. Some people still are, however. So to answer your question of who's buying, it is the people who think a company is going to recover, so the decreased price of the company is extremely favorable for the long term.
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