Understanding a Stock's Price vs. it's Value

Let’s talk about Apples!

Hi, I’m Warren and I’d like to simplify some investing concepts to get you started.

So back to the apple, what's the value of an apple, it can feed you for one meal, now let’s say there are two people, the price or what you’re willing to give up for it just went up, now the value stays the same.

Now let’s just say there’s a marketplace and more people want the apple, the price just went up.

Along comes a salesman and he tells you these apples are amazing, they're going to produce a whole farm of trees!

Now more people want to buy them and the price just went up, simply because more people wanted it at that moment in time.

Takeaway

Don’t let price skew your determination of value, learn how to determine value so you know what’s a fair, overvalued and undervalued price.

This isn’t too hard with an apple, it wouldn’t be easy for someone to overprice an apple and sell it to you, but when it comes to companies things can be a bit more complicated.

(the price is determined by how much the last person was willing to pay for it, and it keeps changing with each sale)

Video production by Wild Wing Media

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