My little girl today asked me how the Stock Market works.
This was my reply..
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for 1000 each.
The villagers, seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at 1000 and as supply started to diminish, the villagers stopped their effort.
He further announced that he would now buy at 2000. This renewed the efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms.
The offer increased to 2500 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at 5000! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the villagers; "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at 3500 and when the man returns from the city, you can sell them to him for 5000 each."
The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere!
Now she has a better understanding of how the Stock Exchange works.
If you think you can, and if you think you can't , either way, you are right!