If Everyone is Selling, Who is Buying? (2024)

The Great Wealth Transfer has been historically known as the shift of assets from Baby Boomers to their heirs, which some estimate to be in the ballpark of $68 trillion over the next two decades.1 But, I’d like to share about a different transfer of wealth, one that all investors need to be aware of.

Where Did All That Money Go?

A client once posed this question after a significant market downturn. One day, the global stock market with worth x, and then it rapidly declines and is worth 30% less the next month. So, where did all that money go?

For such an astute question, I’m not ashamed to say that I didn’t have a good answer. But, here’s what I said.

Daily Valuations Pose a Problem

The stock market provides this unique way of valuing companies every single day, down to the penny. The problem with that is, as we’ve seen, those valuations can have drastic, short-term swings. Just as stock valuations can decrease quickly, they can also increase quickly. Therefore, it’s possible that “all the value” didn’t go anywhere, but is only taking a temporary break during a time or elevated uncertainty.

This is evidenced by what we often see after steep market declines; steep market rebounds. Can the global stock market truly appreciate by 30% in a month or two? On one hand, if you measure from the bottom after a 30% decline, sure it can. But you can also argue that it never truly lost its value to begin with.

Can There Be a Sale Without a Buyer?

In most cases, no. This means that when you sell your stock at a steep discount, someone is buying. The buyer could be another investor or a market maker.

Market makers can take the opposite side of a trade to provide liquidity for stocks that are listed on major exchanges. As stated by Investopedia.com in their article, “If Everyone Is Selling, Does Your Broker Have to Buy Your Shares From You,” just because a market maker might buy a stock that you’re selling, it doesn’t mean they are going to give you a good price.2 In fact, most market makers won’t purchase a stock unless they believe they can make a profit on it, which means prices will have to drop far enough for market makers to make a profit.

Stay on the Right Side of Every Transaction

This essentially means that every time you sell a stock or mutual fund at a steep discount, someone else, not you, is likely going to profit. So, why sell in the first place?

The best way to achieve investment success is to stay on the right side of every transaction. Don’t allow market makers, brokerage houses, and institutional investors or money managers with deep pockets to transfer your hard-earned money into their pockets.

Why You Need a Plan

Staying on the right side of every transaction might be easier said than done, but if you begin to understand some of these basic concepts, you can decrease your risk of locking in a poor transaction. I believe the best way to protect against a forced sale is to create a plan.

A good plan, especially for retirees or “near-retirees,” is one that provides plenty of liquidity, and liquidity that is free of market volatility risk. This could mean having a portion of your portfolio invested in money market funds, bond funds, CDs, etc. Of course, investing too much of your portfolio in investments with low expected returns could be detrimental, so balance is important.

Before the Next Crash

Will the next stock market crash occur in the fall of 2020? It’s impossible to tell. However, we happen to be in a unique point in time (post the March 2020 stock market crash and prior to the 2020 Election and next potential COVID-19 outbreak).

In other words, it’s an ideal time to review your investment plan so you’re not caught in a position that you’re forced to sell a stock or fund at a steep discount whenever the next crash does occur.

As always, speak to a licensed investment advisor, preferably a CERTIFIED FINANCIAL PLANNER™ professional for help with your specific situation. My encouragement to you and all investors is to stay on the right side of history and don’t become a victim of the next market-induced “Great Wealth Transfer.”

Sources:

1. CNBC.com; What the coming $68 trillion Great Wealth Transfer means for financial advisors; https://www.cnbc.com/2019/10/21/what-the-68-trillion-great-wealth-transfer-means-for-advisors.html

2. Investopedia.com; If Everyone is Selling, Does Your Broker Have to Buy Your Shares From You? https://www.investopedia.com/ask/answers/selling-bear-market-does-your-broker-buy-your-shares/

If Everyone is Selling, Who is Buying? (2024)

FAQs

If Everyone is Selling, Who is Buying? ›

There are always as many buyers as there are sellers and that keeps the system going. If you are wondering who would want to buy stocks when the market is going down, the answer is: a lot of people.

Who buys stocks when everyone is selling? ›

But there's one group of investors who charge in to buy when stocks are selling off: the corporate insiders. How do they do it? They have 2 key advantages over you and me that provide them the edge during uncertain times. If you follow their lead, you can have that edge too.

Should you buy when everyone is selling? ›

So, while some people may think that property isn't such a good buy anymore we agree with Warren Buffett's overall sentiment: Buying when everyone else is selling could be a very good idea, AKA the time when everyone else is fearful could be a very, very good time – in the best sense of the word – to be greedy.

Is there a buyer for every seller in the stock market? ›

For every transaction, there must be a buyer and a seller. If the last price keeps dropping, transactions are going through, which means someone sold and someone else bought at that price.

When everyone is selling you buy? ›

Jonathan Sacks Quotes

The wisest rule in investment is: when others are selling, buy. When others are buying, sell. Usually, of course, we do the opposite.

What to do if there are no buyers for a stock? ›

If you buy a stock for Intraday, at the time of square off there need to be buyers (not sellers as you have mentioned) cos you'd have to sell and the counter party is a 'buyer'. If there are no buyers, it means that you can't sell. You'd be forced to take delivery of these shares to your demat account.

What if there are no buyers for an option? ›

what happens if there are no buyers of option contract , will it be consider as zero value or settle at last trading price. Option contracts are settled on the day of expiry. When the contract turn illiquid, the settlement will happen at the intrinsic value of the contract.

How to not be greedy in the stock market? ›

You should keep constant track of your investment. With that track, you should be able to assess all your investments and see whether they align with your planned goals or not. Having a trading journal of your investment can help you make analytical decisions while putting your emotions down.

How do you sell when no one wants to buy? ›

Focus on the emotion: 99% of the time people don't want to buy what you sell is because of the emotions attached to the purchase. You are not a want. Sooner or later — you're a necessity. So in your marketing — paint me a picture of how you help your customers get over the very thing they're afraid of.

How does a stock price go up if nobody sells? ›

If nobody sells the stock and buyers are there putting the limit to buy the stock, stock price increases. If there is no seller and no buyer price of stock remains same. Price shall vary according to the demand.

What happens when sellers are more than buyers? ›

If there is a greater number of buyers than sellers (more demand), the buyers bid up the prices of the stocks to entice sellers to sell more. If there are more sellers than buyers, prices go down until they reach a level that entices buyers.

Can you see who buys and sells stock? ›

If the trader is a large player whose trades might be 5% and upwards of the shares in a company then other investors in the company can file a request to the Directory of Companies to see who are these large players and how many shares they are buying and selling.

Who is buying stocks when you sell? ›

Exchanges are, by their nature, anonymous. And, while it's almost impossible to know exactly who bought your stock and for what reason, it's likely they belong to one of just a few categories of traders. For instance, your trade could very easily get matched with another retail investor just like yourself.

What is the golden rule of selling? ›

Brian Tracy: “Sell unto others as you would have them sell unto you. The successful sales professional uses the golden rule to sell with the same honesty, integrity, understanding, empathy, and thoughtfulness that they would like someone to use in selling to them.

Who said buy when everyone is selling? ›

It reminds me of the old investment advice: buy when everyone is selling and sell when everyone is buying; or, as Warren Buffett puts it: That's what we've seen with Celsius, but we've also seen it across all markets.

How do you always sell? ›

What are some techniques for selling?
  1. Completely understand the product you're selling.
  2. Know your market and who will buy your product.
  3. Position the product as a solution to a problem or make something easier.
  4. Make your customer comfortable with you as a seller.
  5. Show first, then sell.
  6. Don't talk down to your audience.

Who pays you when you sell a stock? ›

When you sell your stocks the buyer pays the money; when you buy the stocks the money you paid goes to the seller. The transactions are handled by stock brokers.

Who is someone who buys stocks? ›

A stock trader is someone who buys and sells stocks, whereas a stockbroker is a middleman or entity that helps a trader facilitate those trades.

Who are the buyers in the stock market? ›

Individual and institutional investors come together on stock exchanges to buy and sell shares in a public market. When you buy a share of stock on the stock market, you are not buying it from the company; you are buying it from an existing shareholder.

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