What in the world is the stock market? Here are your 10 most basic finance questions, answered.
What are these bulls and bears I keep hearing about? Why are animals investing?
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According to investment adviser Josh Brown, who also blogs prolifically under the moniker Reformed Broker, the terminology is dates back to 100 years ago.
"The idea is if you're bullish, you expect things to be better, where stock prices and the market to go up," Brown said. "If you're bearish you expect the opposite. It's just a way to describe people's attitudes about the market at a given time."
But why a bull and a bear specifically? That's a question without a clear answer. However, there are two prevailing theories about the specific choice of animals.
The first suggests that the way each animal attacks an opponent generated the tie into the stock market, with a bull's horns going up and a bear swiping down, thus representing market moves.
The other theory holds that the middlemen in the bearskin trade historically sold skins they didn't yet have in an effort to make money on the bet that the price of the skins would drop before they obtained them. These sellers were then known as bears, which represented the hope that the market would drop. And because the sport of bear-and-bull fighting was once a popular occurrence, many thought of bulls as the opposite of bears and the name stuck to describe the market going up over time.
How do people decide what a stock is worth...like, what makes a stock go up and down?
Via buzzfeed.com
Stocks move up and down based on a combination of fundamentals about a company, like earnings, leadership changes, and any news events surrounding the brand. The fluctuation of a stock's price is also dependent on people's expectations of what the forward motion of those fundamentals is going to be.
