Stock Marker Urban Myth?

[HowserRoll]

Stock Market Urban Myth? Variable Book Cost?

This might be an urban myth, or I might just be really stupid .....

I thought that when you buy shares on the stock market, you buy them at a certain value. You then simply match that value against the current value of the share to make a profit or loss (admin fees / taxes etc aside).

So why would a price for 30 shares - say at 282.5, with a book cost of £85.02 (with a value now of £84.75, and loss -0.27), change the next day to a price of 296.25, with a book cost of £91.87 (with a value now of £88.88, and a loss of £3), also change later to a price of £303.25, with a book cost of £91.87 (with a value now of £90.98, and a loss of £0.90).

I was under the impression that the shares you brought stayed at the same price that you brought them for (say 282.5 / book cost £85.02), then you just compared that to the 'value now' at any given time (say £90.98, and a profit of £5.96).

Would the book cost be the same thing as book value (assets less liabilities), so this can vary from day to day? If is it, how can the book cost be accurately calculated at such a quick rate?

If that is the case, then is making a profit with shares not just a simple case of buying low, selling high - it's also matching this variation up with the variable book cost of the shares that you hold? So the share price could rise, as could the book cost - eating into any profits.

Or should the book cost remain stable?

 

[EminiForecaster]

Book value and intrinsic value are two ways to measure the value of a company.

In simple terms, book value is based on the value of total assets less the value of total liabilities - it attempts to measure the net assets a company has built up until the present time. In theory, this is the amount that the shareholders would receive if the company were to be completely liquidated. For example, if a company has $23.2 billion in assets and $19.3 billion in liabilities, the book value of the company would be the difference of $3.9 billion (book value). To express this number in terms of book value per share, simply take the book value and divide it by the number of outstanding shares. If a given company is currently trading below its book value, it is often considered to be undervalued.

 

[HowserRoll]

Would this just be the price fluctuation between the trade and settlement date?

 

[foredog]

You're over complicating things. The book value appears to be the current price, your broker will show that because thats the net worth of your portfolio. Otherwise a lot of people who bought bank shares last year would still theoretically be worth double their book value.