The basics of buying & selling - Stocktrades Canada

When we buy a stock or an ETF. Who do we buy it from?
Let’s say I want to buy 20 shares of AQN, the market price per share is $20.00. I log on to Questrade or Wealthsimple and simply buy it. Who am I buying it from? Is there someone who purchase 20 shares of AQN at $10, and now wants to cash out ?

More importantly, when the markets crash in a crisis like environment like 2007 or 2019/20. Everyone wants their money to safe and try to cash out. Let’s say AQN is now $15/share and I want to liquidate all 100 share. Who buys them? Are there people out there thinking 100 @$15/share is a good investment on a dip? Or do I see the AQN drop to say $1/share as everyone is panic selling and there are no buyers?

If the latter is true, do you recommend liquidating portion of holdings every say 5 years?

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Asked on April 19, 2021 8:00 pm

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Private answer

HI Ayonde,

So yes - when you buy a stock, it is because there is a seller on the other side willing to sell it to you. The reasons for buying/selling are too numerous to count, but in effect someone is selling you that stock. Could be an individual, corporation, fund, etc. It could also be from a recent share offering.

In a crisis environment, you will usually see more sellers than buyers which is why the prices drop - basic example of supply and demand. Too much supply, not enough demand = price drops. And yes, absolutely there are buyers thinking buy-the-dip.

Liquidating a portion every 5years? No. Not sure the logic behind this one. There are positions I've held for more than a decade and have zero intentions of selling. Even during the march crash we advised members not to sell - and sure enough, the market rebounded fairly quickly and had you sold, you would have missed out on gains buying back in at higher prices. This is like timing the market.

If you like your position, its long-term prospects and it fits within the context of your portfolio - then there is no reason to sell randomly every 5 years.

Mat

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Posted by Mathieu Litalien

Answered on April 20, 2021 4:46 am

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