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Investopedia should not be your source of truth. While you can get quality education for free on the internet in various subjects(math, CS, biology) - financial
by module0000 9y ago
Investopedia should not be your source of truth. While you can get quality education for free on the internet in various subjects(math, CS, biology) - financial markets is not one of them.
Market value is exactly what the parent asserted it is, and the source of truth for that is your bank. If you are long 500k shares of AAPL and the quote is $100 - your bank will not consider you to have $50mil liquid assets. They know(and you should to) that starting to unwind a position of that size will decrease the market value a considerable amount.
Maybe an example will help you out here.... Let's walk through that AAPL example. You are sitting on 500k shares.
Step 1: Order 100,000 shares sold at market.
Step 2: Observe your average sale price is more likely to be $90-95 than $100.
Step 3: Order another 100,000 shares sold at market.
Step 4: Observe your average sale price is more likely $90-91 than $90-95.
Steps after this: same result, diminishing prices resultant from your sale(s).
See a trend here? The market value of your assets is decreasing based on the market's perception of value, not on the mechanical formula investopedia fed you. Your unloading of shares is going to decrease the perceived value, which decreases the price you can sell them for.
tldr; investopedia's advice on markets is barely more accurate than urban dictionary's advice on word meaning.
- notyourday 9y agoAAPL 500k shares? Yeah, not correct. AAPL average 50 day daily volume is slightly less than 28 million. Sell Day 500k AAPL bid - 0.001 SHOW QTY 100 won't move a market at all.
- module0000 9y agoIt's an example, the price being $100(nice round number) being a bigger fudge than the quantity.
- everdev 9y agoNo, market value is the name of a math formula. It sounds like you're asserting that market value != Real world value which is true but irrelevant to the definition of market value. So as crazy as it sounds $100B in market value can be erased by a drop in the market price of an asset. But don't confuse that with $100B actually being lost or investors realizing $100B in losses. But in any event the title of the article is accurate.
- PhantomGremlin 9y agoYou've got the right idea, but picked the absolute wrong stock for your illustration. Apple's current market cap, i.e. shares outstanding times share price, is approximately $866 billion dollars. Apple traded 21,583,997 shares today. Aggressively selling 500,000 shares (less than $100 million dollars worth) might move the market in this stock by perhaps 1%, certainly not anywhere near 10%.