![]() | |
![]() | |
![]() |
Investing Information |
|
![]() |
What Is A Fair Market Value, Really? If Youre Going To Trade, Be Sure Its Worth It!
I've been involved in online trading, specifically with stock and index options, for several years. In this time, I've spent a great deal of time thinking about value and the fact that anything, be it a stock or currency or even a house, is worth exactly whatever someone else will pay for it. Sure, there are a million and one pricing models (especially in financial markets) that will tell you precisely what something should be worth. But in the final analysis, if nobody will pay that much, then it's not actually worth that price. Let's illustrate this concept in a very simple fashion. I'm an American so I'll use U.S. currency to make my point. What is a $20 bill worth? Without over thinking it and talking about inflation, exchange rates, etc. let's just say that it is generally believed to be worth $20. Would you pay me $20 for a $20 bill? I'm going to guess probably not, as there would be no real reason to do so. You would have to go to the trouble of getting me your $20 and I would have to go to the trouble of giving you my $20 bill, and neither of us would be in a better position than we were before. Therefore, I would like to present the idea that a $20 bill is not actually worth $20 since nobody would likely pay $20 for it! So how much would you pay for a $20 bill? Would you pay $19.99? Is it worth the effort for 1 cent? No? How about $19.50? $19? Shall I keep going? In a free and fair market it is the market itself which determines value, and given a large enough market, that value should be fairly accurate. I read an article online some time ago about someone who decided to conduct an experiment just for fun. He put a new $5 bill up for auction online and began the biding at 1 cent. He crafted a creative description of the note, and waited to see the results. When it was all said and done, the bill did in fact sell - for slightly over $3. He then spoke with the winning bidder, who said he had made a profit many times online by purchasing currency for less than face value (including a $20 bill for less than $10 as I recall). The conductor of the experiment left it at that - nothing more than a somewhat humorous exploration into what people think something is worth. But to me this meant so much more. A dollar is not actually worth a dollar... so what is it worth? What would you trade for $1? For $20? For $100? $1,000? And if a dollar isn't actually worth a dollar, is a share of stock worth $50, or in fact anything at all? The answer is yes. At any given moment it is worth precisely what someone is willing to pay for it. No more, no less. Money and value are merely ideas, they are not absolutes. Consider this carefully the next time you are convinced that the stock, option, currency, house, or anything else you want to buy, is worth what you're about to pay. Jonathan van Clute is a full time investor, educator, speaker, and online options and sports arbitrage trader. In addition to his business activities, he is also a musician, video editor/animator, and one of the world's greatest Segway Polo athletes. He can be reached via email at jonathan@PMLinvestments.com and is speaking at an upcoming teleseminar, visit http://www.snurl.com/vcfmv for details.
MORE RESOURCES: Investors obsessing over AI is latest symptom of the 'Amazon disease': Morning Brief - Yahoo Finance Pros and Cons of Cryptocurrency Investing The White Coat Investor USI holds stock market investing seminar for students 14 News WFIE Evansville Want to Invest in ChatGPT? Buy Microsoft Stock Investing.com Roundtable Discussion: Industry experts help you plan your ... Robotics and Automation News How Shopify's investing strategy has evolved Modern Retail OH investing $525k in community health with 25 grants The Owensboro Times 26 Meme Stock Alternatives: Momentum Investing Advice, Evercore Business Insider U.S. Debt-Ceiling Clash: What Investors Should Know U.S News & World Report Money Where to Invest $100 Right Now The Motley Fool Investing When Your Time Horizon Is Short The New York Times 8 Stocks to Buy That Benefit From Falling Inflation U.S News & World Report Money Ashton Kutcher's tech investments made him millions—now he only takes 'roles that I want to play' CNBC Kansas City Chiefs Look For Big Win — In Startup Investing Crunchbase News Should I Avoid Investing More Than $500,000 With a Single ... Clark.com - Clark Howard Why Is Wall Street Loving Amazon So Much? Investing.com The Pitfalls of Investing in China Barron's Why You Should Invest: Top 10 Reasons AllBusiness.com Bull Now, Bear Later? Investing.com Add “X” to Boost QQQ Yield From 0.9% to 8.4% Investing.com European Open: Macro Vacuum Investing.com 3 Hot Stocks Analysts Are Buying Investing.com The 10 golden rules of investing Yahoo Finance Want to Get Richer? Where to Invest $10,000 in 2023 The Motley Fool Markets Buoyed, Bitcoin Rebounds Post Powell Comments Investing.com Investing in Method Andreessen Horowitz Investing in Curtiss-Wright (NYSE:CW) five years ago would have delivered you a 47% gain Simply Wall St Comcast investing in $50 million project to expand broadband ... The Times of Northwest Indiana ETFs Allow Investors to Follow Washington's Stock Choices The Motley Fool As layoffs wreck tech, how can investing in employees battle burnout? University of Colorado Boulder |
![]() |
![]() |
![]() |
RELATED ARTICLES
Finding the Perfect Company The perfect company - it's the holy grail of the investment world. The company that will make its initial investment hundreds of times over. 25 Ways to Find Companies to Buy When you start your program to purchase your "ideal" company, you quickly realize that your ultimate success will depend on two primary skill sets: 1) Your ability to FIND viable companies that are for sale, and 2) Your ability to effectively qualify the potential acquisition investment once found.This article is about only step one, how to creatively find viable companies and one's that are able to be purchased. Buy: Hold: Sell: Jump I'm sitting here at my computer desk with a cup of coffee at my elbow. The coffee rest in a mug, the mug garnished with the words Buy, Hold, Sell, Jump, vertically along its sides. Going Offshore For Asset Protection There are a number of key reasons why individuals and businesses consider going offshore for asset protection purposes.The asset protection advantages the offshore world offers extend from protecting a business from excessive taxation to opening doors to enable wealth and asset enrichment via the utilisation of offshore investment opportunities. Is a SEP Plan Right For Your Business A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA account for each eligible employee, hence the name SEP-IRA. For Entrepreneurs A SIMPLE Plan May Be Best Q: I own a small decorating business and I'll be the first to admit that I don't know anything about taxes or retirement plans. I'd like to set up a 401(k) or an IRA or some other kind of retirement plan for me and my three employees. Investing: The Art Of Making Your Money Work For You There is a lot to know about investing. It all depends onwhat type of investing you are interested in as well. Options Education: Financing the Calendar! As a trader, one of the key things that I try to consciously do is to cultivate my instincts by talking with other traders and investors as often as possible. It still amazes me how large the divergence of opinion that exists regarding what people believe will unfold as we enter the new millennium. Gold; What Type of Gold to Buy JewelryThe advantages are:? Gold Jewelry is the easiest of the gold to buy and has the enjoyment of being able to be worn.The disadvantages are:? Retail Jewelry is often marked up by 300% or more in the shops. Forex market offers opportunity and information The forex market is what is called an international exchange currency market, where currencies are exchanged on a daily basis. There are five forex market centers around the world - New York, London, Tokyo, Frankfurt and Zurich. Investment Rowing You have rowed a boat at some time haven'tyou? Yes, put the oars in the water and pull. Ofcourse, you don't know where you are goingbecause you are sitting backwards. Why the Rich Keep Getting Richer Rich people: fortunate, lucky, selfish, and arrogant? Or highly educated, caring, brilliant individuals? Becoming rich isn't hard, but it does require a bit of time and knowledge. Having time to get rich, educating oneself, and buying assets are the three key factors in attaining untold wealth. Larry, Moe and Curley, Investment Brokers Larry, Moe and Curley were sitting in their favorite restaurant just off Wall Street having their usual 3 martini lunch and were discussing the day's events and their client portfolios.Larry:"I had 12 calls this morningfrom customers wanting to know why the market was going down". Retirement is Never Urgent Until If you're like many people, your retirement savings have not been growing consistently over the years. We're not referring to the wild fluctuations in the stock market, but rather the fluctuations in our short-term needs. Wit and Wisdom on Money, Wall Street and Success - Part #4 Can you concisely summarize your investment philosophy in a few sentences? My experience is that most people can't. The quotes that follow are diamonds that offer a real powerful education in the world of Risk Management. What My Horse Had For Breakfast Let's see, he had some oats, fresh alfalfa and his vitamins. I know from the mixture that is great food and he will win the seventh race this afternoon. Investing in Car Dealerships: How to Do It Right The financial characteristics of the automobile dealership are attractive:". . How to Setup a Profitable Trading Business In my opinion trading is the most exciting and best way to earn a living in the world. With just a small amount of equipment and space you can do it from anywhere on the planet. Building The Foundation For Wealth You wouldn't build your home on anything less than a solid foundation. Similarly, you can't build wealth and financial independence without first having sound foundational principles to build upon. Your Portfolio and "Old Ironsides" The USS Constitution first ventured into the waters in 1798. From there she became an icon of durability and success. ![]() |
home | site map |
© 2006 |